The amount of money changing hands might shrink, but it's ok, because there will always be fans wanting to support the music they love.
Miguel Senquiz is the digital strategist for indie label Ghostly International, home of rising stars like Matthew Dear, School of Seven Bells, and Gold Panda. He started with a simple task: to fix the label's merchandising platform, but he ended up with much more: a rich and profitable online shop, a music discovery mobile app, and a music startup.
But how? Here are the secrets behind one of the most cutting edge electronic labels.
Interview by Veronica Picciafuoco.
Veronica: Ghostly's shop doesn't just sell records. It looks like a style guide for the modern man, with high profile watches, bags and apparel. Do you think that selling records and tees is not enough anymore?
Miguel: I don't think traditional merchandise is wrong, but it's easy to execute it improperly. Fulfillment is hard for a small team, and margins for CDs and vinyl are very low for a niche label like us. Before, we were selling t-shirts, hats, and the like but there was no vision, no structure. The customer is buying music on the website, then sees the t-shirts and adds it to his cart, but he would never come back, and I thought this was a lost opportunity.
Our strategy was (1) to send a newsletter with new products and (2) to figure out which products we wanted to sell and why. We knew we needed high-margin product but we wanted also to be consistent with the image we had in mind. We were growing up and loving other products rather than just t-shirts and jeans, that's why we now have a specialized buyer that curates the shop. We also completely outsourced the fulfillment process to guarantee responsive delivery.
Veronica: Do you think this is a sound strategy for any label?
Miguel: Yes. If you have a brand, if you have a group of people who love your music and the art around it, they will probably appreciate curated extensions, as it's a new way for them to connect more with music.
Veronica: How far can this strategy go? For example, would you be open to a brand sponsoring one of your artist's concerts?
Miguel: We are not actively looking for this kind of advertising, but the majority of brands we reached out to already knew usand were fans of our work, and I am happy if a brand that resonates with us reaches out. If we were just starting, then it could be a different story.
Veronica: Let's talk talk about Ghostly Discovery, your iPhone app. What's the story behind it?
Miguel: We wanted to do a discovery app specifically, for a couple of reasons. We release music across many genres and we wanted to build a tool for people to discover parts of the catalogue they didn't know. If you play Matthew Dear on Pandora, you just get music from the same genre. With our app, we suggest some things that you might like, but you wouldn't think about because it's a different genre that you don't usually listen to.
Veronica: Like an algorithm that associates song not only by sound association but emotion and atmosphere?
Miguel: There is no algorithm, it's all done by hand! We manually curated any combination of mood, color, tempo, and timbre. From a discovery standpoint, it was a clever way to cross-promote our music. Also, electronic music is a difficult genre to get into it if you don't know what it is. We did not want to use genre-based discovery because it's self-isolating. With mood, the barrier to entry is much lower: my mom couldget it. And we chose to give it away for free to make it accessible not just to our fans but to everybody.
So far, we've had more than 150,000 downloads (it costs about $200 a month to run) and we've already noticed that it's effective branding: people look at us more seriously and a lot of doors have opened. Unfortunately, Apple does not give clear data on the iTunes purchases made via the app, so it is hard to assess the impact of it on music sales.
Veronica: I've noticed that sometimes your online store doesn't offer every configuration (LP, CD, download, etc.) for every song or album. Is there a strategy behind this?
Miguel: No. If we had the rights for everything, we'd sell everything, and we also allow artists to sell from their own website. Whatever is most convenient for the consumer. Of course, if you buy digital music from us, it's a better margin than Amazon's MP3 store, but we're not going to force you to come to us.
In terms of units sold, we have such low numbers that limiting people to one source would not translate into a significant economic advantage for us. We prefer people to buy music as quickly as possible, and get artists paid as quickly as possible. A better strategy for us is focus on loyalty and repeat purchases,rather than trying to take every penny. This is also the reason why all our music is available on Spotify and Rdio, although we don't make any money from those services.
Veronica: Aren't you afraid that streaming services like Spotify or Rdio will cannibalize your sales?
Miguel: There will be other ways to monetize the relationship between fan and musician. The amount of money changing hands might shrink, but it's ok, because there will always be fans wanting to support the music they love. Labels exist to help the artists get this support, and if eventually we can't do it anymore, we'll just do something else!
Veronica: You are telling me that the role of labels is shrinking/changing: what's the added value of a label today?
Miguel: At Ghostly, there are whole teams dedicated to marketing music, talking to the press, finding booking agents, licensing songs for movies and other opportunities. Most artists don't want to do this, or just can't mix that part of the brain with the other. We do all this valuable work.
Veronica: You recently launched a subscription service, which offers exclusive content and downloads for a monthly fee of $15. Can you tell me about this new idea and how it became a self-sufficient business named Drip.fm?
Miguel: We believe that if you care about something, you'll want pay for it. We believe that if you care about something, you're willing to support it. Even in a world where Spotify exists, we believe this kind of fan-artist patronage is possible. The Drip was born to facilitate this. Subscription is a model we love because it's easy for the consumer, it allows them to effortlessly support the artist by giving us their credit card details once. The idea behind Drip is that if you are a label, and you have that kind of following, you should be able to set up a subscription service.
There was no technical way to do it, so we built it, initially just for ourselves. The artists were kind of skeptical about this until they got their royalty checks. Now they are like: 'wow, I am making money from a 7-year-old record that hasn't delivered royalties in years!'
It hasn't launched officially yet, but we have been already contacted by a number of labels who want to use it. They can charge any fee they wish, and distribute content as frequently as they like. They can even design multiple levels of subscriptions, give exclusives to subscribers, and keep them engaged. It makes so much sense, but for whatever reason, nobody was doing it!
Veronica: Today's technology—like embedded players—gives you lots of data, but it's hard to turn this information in a profitable strategy. Do you think there's value in this new information?
Miguel: The issue with data is statistical relevance. If you don't have enough plays, there isn't enough info to make a strategy. For example, if you have 10,000 plays of a song, and you see that 3,000 are in UK and the balance are in US, that doesn't really tell you anything, it is a vanity metric. Unless you're Katy Perry and you have enough information on a specific territory that might tell you have to go perform there. A more sound strategy is simply collecting email in exchange for downloads.
Veronica: Do you have any final recommendations to share with fellow labels?
Miguel: Work on the relationship with your fans first. Whether it is exposing them to other stuff, or giving them free stuff, there's so much more to be gained in nurturing the relationship rather than trying to sell them everything. Talk to them, figure out who they are, what they want, what they think about you. We always write an email to every subscriber of our mailing list, after the first month, asking: have we fulfilled your expectations? How can we do better?
Also, once you establish a relationship with your fans, you turn them into brand evangelists, people who recommend your music to friends.
But how? Here are the secrets behind one of the most cutting edge electronic labels.
Interview by Veronica Picciafuoco.
Veronica: Ghostly's shop doesn't just sell records. It looks like a style guide for the modern man, with high profile watches, bags and apparel. Do you think that selling records and tees is not enough anymore?
Miguel: I don't think traditional merchandise is wrong, but it's easy to execute it improperly. Fulfillment is hard for a small team, and margins for CDs and vinyl are very low for a niche label like us. Before, we were selling t-shirts, hats, and the like but there was no vision, no structure. The customer is buying music on the website, then sees the t-shirts and adds it to his cart, but he would never come back, and I thought this was a lost opportunity.
Our strategy was (1) to send a newsletter with new products and (2) to figure out which products we wanted to sell and why. We knew we needed high-margin product but we wanted also to be consistent with the image we had in mind. We were growing up and loving other products rather than just t-shirts and jeans, that's why we now have a specialized buyer that curates the shop. We also completely outsourced the fulfillment process to guarantee responsive delivery.
Veronica: Do you think this is a sound strategy for any label?
Miguel: Yes. If you have a brand, if you have a group of people who love your music and the art around it, they will probably appreciate curated extensions, as it's a new way for them to connect more with music.
Veronica: How far can this strategy go? For example, would you be open to a brand sponsoring one of your artist's concerts?
Miguel: We are not actively looking for this kind of advertising, but the majority of brands we reached out to already knew usand were fans of our work, and I am happy if a brand that resonates with us reaches out. If we were just starting, then it could be a different story.
Veronica: Let's talk talk about Ghostly Discovery, your iPhone app. What's the story behind it?
Miguel: We wanted to do a discovery app specifically, for a couple of reasons. We release music across many genres and we wanted to build a tool for people to discover parts of the catalogue they didn't know. If you play Matthew Dear on Pandora, you just get music from the same genre. With our app, we suggest some things that you might like, but you wouldn't think about because it's a different genre that you don't usually listen to.
Veronica: Like an algorithm that associates song not only by sound association but emotion and atmosphere?
Miguel: There is no algorithm, it's all done by hand! We manually curated any combination of mood, color, tempo, and timbre. From a discovery standpoint, it was a clever way to cross-promote our music. Also, electronic music is a difficult genre to get into it if you don't know what it is. We did not want to use genre-based discovery because it's self-isolating. With mood, the barrier to entry is much lower: my mom couldget it. And we chose to give it away for free to make it accessible not just to our fans but to everybody.
So far, we've had more than 150,000 downloads (it costs about $200 a month to run) and we've already noticed that it's effective branding: people look at us more seriously and a lot of doors have opened. Unfortunately, Apple does not give clear data on the iTunes purchases made via the app, so it is hard to assess the impact of it on music sales.
Veronica: I've noticed that sometimes your online store doesn't offer every configuration (LP, CD, download, etc.) for every song or album. Is there a strategy behind this?
Miguel: No. If we had the rights for everything, we'd sell everything, and we also allow artists to sell from their own website. Whatever is most convenient for the consumer. Of course, if you buy digital music from us, it's a better margin than Amazon's MP3 store, but we're not going to force you to come to us.
In terms of units sold, we have such low numbers that limiting people to one source would not translate into a significant economic advantage for us. We prefer people to buy music as quickly as possible, and get artists paid as quickly as possible. A better strategy for us is focus on loyalty and repeat purchases,rather than trying to take every penny. This is also the reason why all our music is available on Spotify and Rdio, although we don't make any money from those services.
Veronica: Aren't you afraid that streaming services like Spotify or Rdio will cannibalize your sales?
Miguel: There will be other ways to monetize the relationship between fan and musician. The amount of money changing hands might shrink, but it's ok, because there will always be fans wanting to support the music they love. Labels exist to help the artists get this support, and if eventually we can't do it anymore, we'll just do something else!
Veronica: You are telling me that the role of labels is shrinking/changing: what's the added value of a label today?
Miguel: At Ghostly, there are whole teams dedicated to marketing music, talking to the press, finding booking agents, licensing songs for movies and other opportunities. Most artists don't want to do this, or just can't mix that part of the brain with the other. We do all this valuable work.
Veronica: You recently launched a subscription service, which offers exclusive content and downloads for a monthly fee of $15. Can you tell me about this new idea and how it became a self-sufficient business named Drip.fm?
Miguel: We believe that if you care about something, you'll want pay for it. We believe that if you care about something, you're willing to support it. Even in a world where Spotify exists, we believe this kind of fan-artist patronage is possible. The Drip was born to facilitate this. Subscription is a model we love because it's easy for the consumer, it allows them to effortlessly support the artist by giving us their credit card details once. The idea behind Drip is that if you are a label, and you have that kind of following, you should be able to set up a subscription service.
There was no technical way to do it, so we built it, initially just for ourselves. The artists were kind of skeptical about this until they got their royalty checks. Now they are like: 'wow, I am making money from a 7-year-old record that hasn't delivered royalties in years!'
It hasn't launched officially yet, but we have been already contacted by a number of labels who want to use it. They can charge any fee they wish, and distribute content as frequently as they like. They can even design multiple levels of subscriptions, give exclusives to subscribers, and keep them engaged. It makes so much sense, but for whatever reason, nobody was doing it!
Veronica: Today's technology—like embedded players—gives you lots of data, but it's hard to turn this information in a profitable strategy. Do you think there's value in this new information?
Miguel: The issue with data is statistical relevance. If you don't have enough plays, there isn't enough info to make a strategy. For example, if you have 10,000 plays of a song, and you see that 3,000 are in UK and the balance are in US, that doesn't really tell you anything, it is a vanity metric. Unless you're Katy Perry and you have enough information on a specific territory that might tell you have to go perform there. A more sound strategy is simply collecting email in exchange for downloads.
Veronica: Do you have any final recommendations to share with fellow labels?
Miguel: Work on the relationship with your fans first. Whether it is exposing them to other stuff, or giving them free stuff, there's so much more to be gained in nurturing the relationship rather than trying to sell them everything. Talk to them, figure out who they are, what they want, what they think about you. We always write an email to every subscriber of our mailing list, after the first month, asking: have we fulfilled your expectations? How can we do better?
Also, once you establish a relationship with your fans, you turn them into brand evangelists, people who recommend your music to friends.
