Why You’re Losing A Big Opportunity If You Don’t Do Direct-To-Fans Sales
While building KaryaKarsa, I’ve heard offhand comments (indirectly, of course) that direct-to-fan monetization is “only for amateurs’’, that “I still have enough money to avoid that” and general condescension from “accomplished” creators. Now, of course they are entitled to their opinion, but my opinion is that they are misinformed or uninformed, and I would like to expand on this thought in the hope to inform.
Now, established creators — of whatever form, but since my background is mainly music, I will be referring to music artists often — make a living basically by two primary methods:
- Commissioned work: made to order or upon request and purchase from a third party. Music concerts are more accurately a commissioned work: a promoter hires a band to perform at a concert, and gets money through ticket sales and event sponsorship. The band basically goes where there is an order for playing at an event, as would a commercial artist create a mural at a certain building, or even a comedian being hired as a TV host. In some cases, the artist can also serve as their own promoter, but the model persists.
- Direct brand endorsements: a brand might hire the artist to create content, or activities, or various works, to serve whatever purpose the brand needs. The pattern is that the artist and the brand seek out each other, not through a promoter; the artist seeks a payout, and the brand seeks to tap into the artist’s work and/or the artist’s audience.
Now, there is nothing wrong with either model, and by no means is the artist “selling out” — these are just business models, and anything within the business model is a variance of the same. Achieving a constant stream of projects through both these business models is considered the “holy grail” of becoming a creator, which is why for many years up-and-coming creators have been trying to build their following and engagement count on social media, a virtual currency which is at many times very monetisable. And for many creators, sponsorship is the only viable model to aim for.
The unfortunate side of the “build traffic and audience at all costs to get sponsors” mentality is that many try to make shortcuts and build “viral” content that relies more on sensationalism and controversy, rather than building up a library of quality content and relevant audience. Sensationalism and controversy is in by itself not wrong, but it’s very easy to slip into a race to the bottom when you value it above all else. As brands of the last century often did “publicity stunts” to draw media (and thus public) attention, creators of the 21st century do the same. And to get name recognition and notoriety, sometimes it is enough, as controversial videos get millions of views and thus high Adsense income or sponsorship money. But it does not set good precedent for creators in general, and does nothing to guarantee the quality of content being distributed.
Sensationalism and controversy is in by itself not wrong, but it’s very easy to slip into a race to the bottom when you value it above all else.
Both sponsorship and advertising-driven (also basically brand-derived income) cannot the only ways that creators can make money. As years progressed, being successful as a creator in this direction is more influenced by privilege and luck, rather than the actual quality of the creator’s works. And since both models rely on a mass audience to be beneficial to the benefactors — brands — it tends to favor the creators who can maintain top of mind at all costs, taking away monetisation opportunities even from creators of a similar calibre, let alone creators just starting out with their career. Surely, there is another way.
Now, I’d like to look back to the music industry as it stood last century, to see what we can learn from it.
It may be incredulous to think about now, but a lot of major musicians basically made their money from album sales. World tours were basically done at cost to promote albums, and brand endorsements were supplemental income. Why? Because album sales were exponential.
Let’s put it to numbers.
Say 1 band made $400,000 for every concert outing, paid by promoters, and they did a 20-city tour. Already $8 million in income (before costs). Not bad.
And the band made another $10 million for global brand endorsement for a year. Ok, total $18 million.
Now album sales — a full album would be sold at at least $7. The band would net probably $1 out of each sale — 14% off retail price. But the amount of albums sold is not fixed — they could sell 1,000, 100K or 1 million… or 10 million. Exponential. And since the sales of albums is taken care of the music label, the music label absorbs the risk of production costs (which is why they take the remaining $6), and pays the band an advance of, say, $1 million dollars to keep them happy, throwing in a mansion and some fancy cars. This advance basically says to the band, “I’m paying you $1 million up front, so I will only pay you royalties after your share of the album sales reaches $1 million, so go out there and promote the album.” (Naturally this is an oversimplification of the process, but it should suffice).
So the band has $19 million in the bank at the end of the year, outside of additional album sales. Naturally, the music label would pull out all the stops to make sure the album is a hit, because they invested in the album. Album sales targets would be handed down to all operating countries to make sure the investment is recouped, and then some. And since in those days of mainstream media, it was relatively easy to use marketing power and network clout to get a song into people’s heads through TV and radio, basically bombarding the public with the songs and the artist until everybody bought the album. And remember, those days, the only way you could listen to your favorite song whenever you could was by buying the album. Exponential.
The main difference between album sales and concerts is that there is a maximum limit to how many concerts a band can do. A band would probably be able to play 52 times a year (once a week) before going completely crazy, since they’d have to repeat the same crowd-pleaser songs. A brand endorsement deal looks great on paper, but you can’t really do an exponential number of brand endorsement deals a year. If you’re a guitarist, you can probably do one guitar brand a year, max. Album sales are only limited by consumer purchasing power and production capacity — both things that are easily overcome.
There’s no limit to how many albums you can sell. The limit is how many fans or audience you have.
The other problem I have with brand and advertising derived business models for creators is that the money that enters the creator economy wholly depends on whether creators and their audiences are relevant for brands. This in turn is dependent on budget decisions and committee meetings, which may or may not favor creators. Why depend on an income stream that can disappear on a whim?
Anyway. Imagine a world without album sales, which is where we are now. The same band will probably make a comparable amount of money, but that is it. Next year they’d need to figure out how many other concerts to do and how many brands to talk to, and probably get the same amount. The amount is by no means small, but it’s not exponential. And both concerts and brand endorsements are basically third parties taking advantage of the band to access their audience base. So why doesn’t the band take advantage of the audience base themselves?
A good example of audience base ownership is AKB48 and KPop artists. They both generate a sort of fandom that generates loyalty and purchase, where a fan would go out of his or her way to buy a product from the creator in support of them. Sure, these artists make money from concerts and endorsements, but an exponential growth in income is making sure there are multiple opportunities for fans to express their support through purchases. An example I like to refer to is VLive, which basically provides a 360 video experience of KPop artists. So aside from music content, you can also watch live shows, mukbang or talk shows, or even watch a personal livestream. At every opportunity, the fan is encouraged to purchase digital items to show support in the live chat or other forms of communication — if in a personal livestream you post a specially-bought emoticon or sticker (or fan lights, in the case of VLive) in the chat, the artist will give you a shoutout. That kind of acknowledgement from the artist is almost invaluable for the fan, which is why they are willing to pay. This is why KPop fans will even buy physical, autographed photographs of their idols, even though it is simpler to just print out a photo they got online. There is value in the fan support.
Looking to Indonesia, some bands have smartly switched to merchandise as a method of income and marketing — with Seringai as one of my often-referenced examples. Merchandise is a way for a fan to express their support — their fandom — not only to the band, but also to people around them, as their fandom is part of their identity. And differing from albums, where a fan probably might only buy 1 per album, you can get repeat purchases of merchandise from one fan. And as I mentioned before, the limit is how many fans you have.
The beauty of developing direct-to-fan offerings is that not only the exponential growth potential, but that you don’t necessarily need third parties (like music labels to produce albums) to make it happen. It’s true that a fan would be much more discerning in what they spend on today, given the multitude of choice in them market, but this is all the more reason to create fan offerings that are custom-built for the audience. Additionally, they do not need to be physical products.
As long as the offering presents 1) an opportunity for the fan to express their support to the creator, and 2) something that the fan can use to express their fandom to their surroundings; people will pay. Naturally, the support is towards whatever creation the creator is making (and in most cases, who the creator is), but the value exchange above does not necessarily have to involve said work. For instance, a band could release their music for free online (or almost free, distributed through the music streaming services), but give the opportunity for fans to contribute to the album production cost by becoming a “co-producer” to be named on the liner notes of the limited-edition physical album. Another tier of fans could get just the physical album, or the limited-edition t-shirt. And all the fans could get digital wallpapers to put on their phones. Sure people can copy digital wallpapers, but it doesn’t matter to the fan — they give money not just for the wallpaper, but the show of support and appreciation. So imagine a digital wallpaper sold at $1 selling 100K copies? Pretty efficient use of effort and capital, I would say.
The internet basically decimated album sales for mainstream-culture driven bands through unfettered piracy. Now, the internet also can serve as a method to engage the audience, increase their royalty, and develop a source of revenue not dependent on brand or advertising money, making the problem of lost sales from piracy irrelevant. And once again, a way for creators to make an exponential amount of money is here again. And more importantly, direct-to-fan monetisation is equally accessible by creators of any audience size. By placing more direct-to-fan offerings online, the potential of fan-driven spending will rise, and the creator economy as a whole will grow to the benefit of all.
Another major advantage of doing direct-to-fans business is when you actually build and own the customer database of the fans, as opposed to using platforms that allow you to build audiences but basically force you to buy ads to reach those same audiences. Building an audience base on one service and directing the higher-spending cohort of fans to another, more creator-friendly platform that allows you to collect their data (with consent, of course), makes it easier for creators to build funnels from casual fans to superfans. But this point actually deserves another article.
20 years is a long time for “unit sales” to be something irrelevant for creators. I’m saying, it has quickly become relevant again, though I don’t think it ever went away. It’s time for creators to pick up the mantle and start focusing on building a paying audience for their art.
