What Business Are You Really In?
It’s such a simple question, to the point of being insulting to some (what do you mean, you think I don’t know what business I am in?). Yet I’ve found the right answer to this question to be one of the most meaningfully missing pieces in many businesses.
Most companies default to defining themselves by what it is (they think) they make: if you make hammers, you’re in the hammer business. If you make advertising, you’re in the advertising business. If you make music, you’re in the music business. This thing-focused thinking pervades most every industry, even as folks like Stewart Butterfield have challenged us to dig into the business we’re really in and embrace the fact that “the best — maybe the only? — real, direct measure of ‘innovation’ is change in human behaviour.” Think about selling horseback riding, not saddles.
But provincial thinking persists, perhaps nowhere more glaring (or more brimming with potential) than in the music merchandise industry.
Music Merch: From Financial Footnote to a Pillar of Artist Economics
First, some background on the music merch industry. For decades, merch was comprised of the shirts and hats and hoodies that were an economic afterthought for artists and the industry alike. In a world where everyone was obsessed with getting rich off of CDs (the fastest-growing home entertainment product in history), merch was an intellectual asterisk that was stacked up on the card table next to the bar at concerts.
But then, when the financial floor fell out from under the music industry, merch went from an afterthought to one of remaining ways that artists could actually make money. For some, a lot of money.
The surging economic importance of merch is reflected in the numbers. Bravado, an arm of UMG and the biggest player in the game, just reported that they nearly doubled their revenue year-on-year. And, as tends to happen in sleepy industries that all of the sudden get a lot of attention, the acquisition of companies is starting to border on a frenzy.
But yet, even with all of this activity and all of this newfound money, the music merch industry still thinks that it sells… well, music merch. Whereas we had shirts and hats and hoodies in the past, we now have… well, more shirts and hats and hoodies interspersed with the occasional $1,000 jacket. Here is an industry still stuck on the physical stuff at play, and how this stuff can help them game the Billboard charts, rather than the change in human behavior that they create.
So What Business is Merch Really In?
I believe the best way to understand music merch is to think of it as (one of) the principal means by which fans can increase the emotional proximity to the artists they love. That’s the behavior change at the core of merch: it’s greater emotional proximity to the artist you love (and the tribe that shares your love), not the replacement of an old t-shirt.
One of the most important impacts of the switch to streaming has been the flattening of fandom. Now that we’re all logging into the same services to listen to the same streams of ones and zeros, an artist’s biggest superfan engages in much the same behavior as the most casual fan of that artist. The world of fandom is flatter than ever, and that couldn’t be more at odds with how fans want to feel.
So what happens when you break merch down to this first principle, and re-build this industry around the emotional proximity between artist and fan? Three implications emerge, each of which is relevant to industries far beyond the world of music.
Implication #1: Proximity Leads to Pricing (not the other way around)
When you set aside the “stuff” and start with the emotional proximity that fans want to feel to the artists they love, you can make just about anything. And charge just about anything. When you start by thinking about stuff, you end up charging $150 for a white t-shirt and you make your fans feel robbed and resentful. When you start by thinking about the emotional proximity, you can set price tiers that go up to $10,000 and you can find a happy buyer (see above).
Implication #2: Build for the “We,” Not Just the “Me”
When we’re talking about the emotional proximity between an artist and a fan, it all seems like a very personal experience. And it is, to a point. But the emotional resonance of a purchase (in music merch or any other category) is driven by the collective experience that it fuels just as much as the indivdual experience. Some might think that queuing up for three hours to get your hands on the newest merch drop might be infuriating. But for those in line, the line is a core aspect of the experience. It’s an opportunity to feel part of a broader community with whom you share this emotional connection. Even in the rain. So, in today’s world of quickly-disappearing physical retail, I’d argue that one of the most under-leveraged opportunities for every retailer is to think about how they can fuel experiences that are as collective as they are individual.
Implication #3: Merch As a Service
Kanye’s album “The Life of Pablo” was accompanied by a merch line that was hailed as a huge success, with rumors that it grossed $1m in the course of 48 hours. Even in the midst of this success, it’s intriguing to consider what might have happened if the merch had embraced one of the most innovative aspects of the album. Hailed as “the first SaaS album,” “The Life of Pablo” kept evolving over time, and in so doing was able to retain a far longer stint than most in our cultural attention gaze. What if the merch had found a way to evolve as well? Thinking about merch as a service (in service to the emotional proximity between the artist and the fan) could have led to returns far greater than any number of hoodies and beanies.
Finding Your “Horseback Riding”
Regardless of what industry you’re in, things get more interesting when you break through stuff-centered thinking and focus instead on the human behavior change you can create. Here are a few questions that I think are worth considering to do so:
- Proximity: If you were to start with what your artist/brand cared most about and create a product/offering off of that, what would it be? (it just might be the most valuable thing you could offer)
- We/Me: What could add to the way that your artist/brand sells that could be as much of a collective experience as it is an individual connection?
- Your artist/brand as a service: If you fully re-imagined your offering as a service, what would change? How would it “update”? How might you charge differently?
If you’re able to find your “horseback riding,” you’ll not only be able to sell more “hoodies” than you could have ever imagined, you’ll develop a greater emotional proximity with your fans and customers in the process.
