Getting over ourselves, or why advertising works

AdvertisingI work in social media marketing, and as a result many more traditional marketers expect me to have a low opinion of  old school advertising – which is usually characterized by the “30 second spot.” It’s common to find social media purists decrying the state of marketing, knocking advertising as too interruptive, too noisy, disempowering of consumers, and in general a plague upon humankind.

It’s true, I do favor social as a marketing approach – but for those who mistake “social” as “marketing on Facebook,” it’s not about where you play. It’s more about how you play, and the philosophy of empowering consumers, trying to produce great experiences for them and do things on their terms, weaving yourself into the fabric of people’s existing lives in an appropriate and low-impact way. These two philosophies and how the people who espouse them approach social venues are summed up very well in this recent post from my colleague Jen Van Der Meer.

In her post, she refers to the authors of the Cluetrain Manifesto, a seminal book that continues to define the social media side of the argument, admitting that they were wrong when they wrote “We are immune to advertising. Just forget it”:

“That was clearly wrong,” Locke said. “Advertising isn’t going to work? Yes, it can. Google is the biggest brand and company going and they’ve made it completely on Internet advertising, and so checkmate.”

I like that Locke admitted he was wrong, but Google seems like a weak concession. What about the billions of dollars still getting spent on TV, outdoor, even direct mail? Stuff much older than Google is still rocking along.

Why is that? And why does it appear that advertising in some form will always exist, until the end of time?

It’s because we need to be interrupted.

Most human beings are prone to routines. We find ruts and we get in them. It’s a natural mechanism that helps us cope with the risks in the world around us –  a deep survival instinct. Cavemen found the most sabre-tooth-tiger-free path from cave to water source and took that path every day, starting a chain of behaviors that would eventually lead to me taking the same way to work every day.

We even encourage routine in others because we need them to be predictable, to lessen the perceived risk in our world. Sure, there are some folks that are on the surface more adventurous than others, but even adventure can start to be a rut.

Advertising, in many cases, serves as the interruption that nudges you in a new direction. When this happens, we appreciate it, and so do the advertisers. Explore the wine country in Michigan? Sure, good idea. Enjoy a Stella Artois? Hmm, a beer does sound good this morning. Buy that Lexus and put a big bow on it? I was just trying to think what to buy the family for Christmas!

Ok, perhaps those examples are a bit over the top, and I do believe that advertising spend will be generally lower in the future. But regardless of the form it eventually takes, interruptive marketing will always have a place and will always work because we have to get over ourselves. We need the help. Without it, the world would be reaching out to us to try something new a lot less.

Apple unleashed

Apple LogoI don’t make any bones about admitting that I’m a big Apple fan. I’d be hard-pressed to name another company that I think has their approach to the marketplace and how to innovate for consumers so well thought out. I think this is particularly true in the portable device space (iPods, iPhones, iPads). I don’t own a Mac computer and still can’t make the economic argument for it, but in my opinion their portable devices rule the roost. And let’s be honest, for consumers at home, the future is devices. We are likely to find in the near future that the iPhone was never about the phone, it was about getting in your pocket.

As I followed the unveiling of their latest – the iPhone 4 – yesterday, I had to feel excited for users (despite the clear disadvantage of a remaining lock-in to AT&T) and sorry for handset competitors. I wonder what it would be like to have to compete against them in device space.

My Dog RioA likely comparison would be to how I feel when my dog Rio is able to escape the leash, which she has done a Houdini-like 7 or 8 times during her life (which breaks down to about once a year). Once free, she retreats to about 40 yards away and lingers, paying no apparent attention to me. This is just far enough away that if I break suddenly into a dead sprint I will get within 5 feet of catching her before she is able to escape again to another 40 yard cushion.

Over the past year or two, I feel like other manufacturers have been catching up, slowly but surely, to the iPhone. Apple, seemingly unaware, has been sniffing a few trees and loitering non-chalantly. Then the sudden leap forward comes. Competitors must again find themselves 40 yards away, out of breath, dreading the next phase of the chase.

Social media budget is Soylent Green!

Soylent Green Movie PosterCatching up on reading the blogs of some of my respected friends in the social media biz, and I came across this latest one from Adam Cohen where he reacts to the thought that social media at companies is too labor intensive.

He’s right. A quote from his article:

As these [social media] tactics become more successful, they become more expensive.  These tactics require long term effort and can certainly can do more damage if abandoned.  But it takes more effort to continue to manage, build and grow, and that can mean more costs internally, at a minimum.

What he touches on but I’d like to put the emphasis on is that social media represents a shift in thinking on where the money goes . . . from ad space to people.

A real world example:

My brother Jim works in local politics as a campaign manager (and for the record, his record is now 3-0 starting with his work on the Obama presidential campaign). He has found an interesting new formula for winning which others have been very slow to pick up on. He takes much of the budget that would normally go to ad buys, which even for small local races can be in the hundreds of thousands, and he hires and trains a small team of young field operatives who go door-to-door every day for months on end and have real conversations. Now he does leave some in ads for the final get-out-the-vote push, but most he shifts to the ground effort. Most campaigns don’t do this, they get hired guns to work a few weekends and all they really do is leave door hangers, never even knocking.

The odd thing? His approach actually saves money. For instance, for the campaign he’s working on now, back-of-the-napkin math revealed that the repurposed available media budget would allow him to knock on every door of every registered voter that could vote for his candidate three times. Three conversations per voter. He doesn’t even need more than one in many cases.

In my brother’s last campaign, he beat a wealthy candidate who had many more endorsements and much, much larger ad budgets. It took a run-off, but he did it. Is there a fundamental change at work here? I think so.

This post’s title is a reference to an old science fiction movie where the horrific reality behind a popular consumer product, Soylent Green, is that it’s made from people (as in, people’s bodies, yikes). The last, famous line from the movie is the revelatory “Soylent Green is people!”

The reality behind social media budgets that grow as conversational efforts become more successful? They are people! But it can be cheaper than an ad-driven strategy, and you’ve just created new jobs at a time when those people could really use them. That isn’t horrifying at all.

Content: You Get What You Pay For

hulu-logoToday the news came out that Hulu, the excellent service where people can watch high quality network TV for free over the Internet (and was advertised during the most recent Superbowl), plans to start charging subscription fees in 2010.

As I write this, the often-expletive-ridden outrage of Hulu loyalists is being expressed all over Twitter, many people talking about how the service will suffer its demise by 2011, or that one of the best sites on the Internet is now ruined. I can’t remember whether it was my Mom, who always says “you get what you pay for,” or whether it’s all of the economics classes I’ve taken, but somewhere along the line I started to understand that nothing good is created for free. Therefore someone has to pay for it.

I understand that a Hulugoer might be outraged that they haven’t been charged, and now they are going to be. That’s a marketing issue. It would be like a credit card offering 0% interest and then just jacking rates up after 6 months to 30% without warning you when you sign up (which they do, of course, albeit in the fine print). But the fact that you would get all this good stuff served over a single high-performance streaming website for free indefinitely?

It’s hard because we haven’t had to pay before. TV was ad-supported, but now the vast majority of households skip ads via DVR and advertisers are finding many alternative marketing channels (like online word-of-mouth) to promote themselves. Ad revenue continues to drift downward as a result, and networks need to find a new model.

Beyond that, the era of socially acceptable piracy is in many ways still upon us. Many of us just expect the music, movies, or TV to be free because it is on Bit Torrent or in pockets of places online where it is being offered in a sponsored fashion (e.g. a free song to get you to try a new band). Torrenting content is illegal, and you are stealing from its creator. I used to Napster with the best of them in late 90’s (even while I worked at a software company that had to litigate for illegal use once or twice) and I have come to terms with this. I hope that eventually everyone else will too. Also, promotional content for free really is a privilege, not a right.

Finally, and probably the deepest problem in the enraged Hulugoer’s psyche is that many of them haven’t experienced trying to make a go of it as a professional musician, writer, or moviemaker. I think many people envision the creative process as a stroke of inspiration that strikes our best creatives during the 4-5 hours they work every day in between the times they are wooing the opposite sex or trying recreational drugs. The reality is that creating excellent content consistently, like any other profession, is an insane amount of work. The top creators of content, like top athletes or top investors, often have given up all other aspects of life to dedicate themselves to it.

One thing I like about blogging (in general) is that it gives people a taste of that. Merely producing enough content to keep people’s interest from week to week when blogging is an effort. Layer on top of that that the content has to be consistently GOOD, and you’ve got even more effort involved. Add to that that any blog with significant audience takes at least a couple years to get traction, and you’ve got a serious level of dedication required to get to the end result. Ninety-nine percent of new accounts on WordPress will never get there, this one included!

So good for you Hulu, I hope you succeed in getting a decent subscriber base. I think you will, but it will likely only be by offering shows that are not on “ad-supported” network TV. While the charade that your old model is still working continues, you will find it difficult to really fire up another one with the same content. But if it means less Reality TV and higher production value on the paid service, it’d be great to have an option for my buck to add to HBO.

The New Word-of-Mouth Marketing Infrastructure?

This article was originally posted on Powered’s blog, The Engaged Consumer.

The role of a proprietary community environment for the purposes of marketing (or social marketing program) has been hotly debated among brand marketers and social media insiders. We know that social sites are more engaging (people spend more time on them) than non-social, and marketers want to tap into that power.

So as a marketer, do you build your own community, or do you join others’? If you decide to build a community, what is the best marketing application – a community for your Loyalty Program, a community for building Insight into consumers that Market Research uses, an educational community for those considering your products that is more of a Direct Marketing play?

But it seems like brands are benefiting from building AND joining . . . and we’ve seen applications for social marketing that are generating value along each (and in many cases, all) of the above dimensions.

Something I learned long ago is that if your questions have multiple correct answers, then you might be asking the wrong questions.

The range of marketing value propositions that a branded online community can serve indicates that the community isn’t really appropriate for just one of them – after all, separating “loyalty program” from “acquisition program,” “pre-purchase” from “post-purchase,” is something that marketers do for ourselves. Consumers don’t classify interactions that cleanly. Plus we’re seeing social tools being applied in almost every dimension of a company’s customer-facing business . . .

Ecommerce – Social Commerce / product presence through ratings and reviews by providers like Bazaarvoice

Support – Enhanced Product/Service Support Forums by providers like Lithium

PR/IR – Blogging and corporate presence platforms by providers like Awareness Networks

Focus Groups and Research – Formal deep online market research environments from providers like Communispace

The problem with the above applications is that while they are powerful when a consumer is ready to hear about what you’re selling, they suffer from what I call the “dinner party egomaniac” problem. If they are the only social applications you have, you risk sounding like the person at the dinner party who is only willing to have conversations about themselves – your products, your company, your brand. And if your product or brand isn’t particularly sexy, that problem is exacerbated.

This makes it remarkably difficult to drive brand engagement from third party social environments to your properties. On those sites, consumers are busy talking to and relating to each other about the things that matter to them. They are not in a transactional mindset, and the invasive brand-centric presence there will be no more effective than, and probably less effective than, a 30-second TV spot.

What is needed is a transitional space, a place where consumers can go from third party social engagement to brand engagement naturally. A place that “changes the subject” at the dinner party in a way that Emily Post would approve.

This is where a branded online community can enter in – as the platform that reaches into third party social sites, converting third party social engagement into branded social engagement while retaining the context of consumer needs and aspirations. Branded communities need to be focused at the lifestyle and category level for this reason – it’s where the brand connects to consumers and their conversation.

What makes this easier are technologies that most third party social sites are implementing that allow users to take their identity, relationships, content, and features seamlessly from an unbranded environment to a branded one: like Facebook Connect, for instance.


So perhaps all of these things begin to function together in a new-media word-of-mouth marketing infrastructure, as above. Social enablement of the brand presence in all dimensions, and then a social marketing program where the brand connects with the relevant aspirations and needs of the consumer – and which fields participants from social destinations in powerful new ways that wildly outperform more traditional broadcast marketing channels.

I would join a donut community

donutThis article is cross-posted from Powered’s company blog, The Engaged Consumer.

Within Powered, we’ve been mulling over the question “Is Social Marketing for my Company/Brand?” more than usual lately, mostly because we’re working on a white paper addressing that question.

Evaluating your situation as a marketer relative to the social marketing program opportunity is something we’ve addressed a lot in this blog, particularly with Aaron’s popular “Would you Join a Toothpaste Community?” post, along with follow-up posts where Aaron tackled a few challenging products from a community-building perspective. I also sounded off on how the brand is your bridge to community strategy.

But should you build a community? It really comes down to two phases of evaluation. First, is what you’re selling community-worthy? I call this “genetic fit,” because if you’re selling toothpaste, that isn’t going to change overnight, along with other things like your marketplace positioning and branding. Some types of products and services just generate more natural community activity than others.

Second, is your marketing organization and larger company culture in a place where you could pull it off? I call this “cultural fit.” This actually can, and does, change over time – more easily than the genetics do.

But let’s talk about genetic fit, since it’s the one that you really can’t change. And donuts.

I love donuts, but I eat them pretty infrequently – they are something I treat myself to every now and then. Despite my love for the occasional Boston Kreme, I certainly wouldn’t name donuts as one of my passions in life.

So would I (or anyone) join a donut community? Well, maybe for a little while. It would be diverting to go and rate my favorite donuts, debate the virtues of filled donuts over glazed with others, and discover the origin of the bear claw. But would I return again and again over time? Probably not.

Ok, now let’s talk about Dunkin’ Donuts. This changes the discussion a little bit, as I’m now seeing donuts through the prism of a brand. I can visualize Fred the baker from the old commercials getting up and saying “time to make the donuts.” I’m thinking about how good their coffee has always been, along with pretty tasty donuts. Finally, I’m recalling some of the funnier ad spots I’ve seen lately featuring their latest brand campaign “America runs on Dunkin.” Would I join a Dunkin Donuts community? Hmm, a little more interesting than just plain donuts, but again probably not a place where I would return after the initial visit.

dunkin-donuts-logoBut let’s think a bit more about the Dunkin Donuts’ brand. How does Dunkin Donuts get you interested and get you in their store? How do they connect with your needs? A good place is always to start with the tagline – “America runs on Dunkin.” Are they really selling donuts and coffee here, or something more important? Something more basic?

It sounds to me like Dunkin’ Donuts is selling energy. Something that powers you. In a literal sense, the sugar and caffeine is a boost, but energy is something people struggle with – managing your energy level throughout the day is tough. The popularity of energy drinks is escalating rapidly because people are looking for pep. The concept of energy could extend beyond nutrition and the daily grind, too. What about Motivation? Long-term Achievement? Entrepreneurship? These are all principles of energy . . . and things that also fuel the American perspective, a nice tie-in with the tagline. Ok, so what about a community focused on your energy, powered by Dunkin?

Suddenly a fairly compelling community idea is coming into focus that is relevant to the Dunkin’ Donuts brand, and is about something that people care about on a day-to-day basis. I would join this community, and I would come back. Perhaps I would learn and chat about everything from how to avoid the post-lunch doldrums, to the physiological effects of energy drinks, to how to write a business plan for that idea I’ve been trying to get off of the ground. Immediately and over time I would see Dunkin’ Donuts as a bit more than just a brand that makes great donuts, but as the brand that “powers me.” In the end this is what the 30-second spot is trying to do, but this does it in a much more powerful and lasting way.

My involvement in this type of community would significantly affect my Dunkin brand loyalty, and now because the brand isn’t just about donuts to me anymore perhaps they could sell me other things. More products from their expanding home coffee line (perhaps this is the entire initial thrust). An organic energy drink. Baking mixes and cookbooks.

This all started with a donut. And all great brands and businesses start with something that simple. The evolution of your genetics might happen faster and in different directions than you think, dictated by relevant opportunity. Part of understanding what your online community might look like is thinking about what your company might look like, someday.

Carmax, Twitter, and the open conversation

carmax-logoMy wife needs a new car. After nearly ten years in the salt-slicked Winter streets of Chicago, her current car is rusted out and destined for the scrap heap.

It’s been over ten years since I’ve bought a car, and while chatting with her about our options she brought up CarMax, the “no haggle” used car lot that seems to be redefining used car-buying. I did a little research and like what they’re saying. They do a 125-point inspection on everything they sell, they flat-price their cars at something that appears average about 10-15% premium over the car’s private-buyer blue book value (which seems reasonable, and half the premium of a standard dealership), and they don’t commission their employees based on individual car sales. Sounds pretty good, but why not ask Twitter? I posed the following question to people that follow me on Twitter:

Me: Anyone have experience with CarMax – good/bad/gotchas? Going to hit them up this weekend.

And the generous Twitter folks got right back to me. Here were the responses:

Dukethug: @DougWick buddy of mine got burned by some BS from carmax a few years ago. Should be interesting to see how desperate they are.

Baldman: @DougWick We bought Sarah’s car at CarMax and loved the experience, including the trade-in of her old one. We’ll buy our next car there.

ScottIngram: @dougwick My CarMax experiences have been positive. Sold a car to them a couple weeks ago. My in-laws bought their car there and are happy.

Atxryan: @DougWick My friend @atxkat bought a car from CarMax and the clutch went out less than a month later. Was not covered by their warranty.

Doogsatx: @DougWick sold my 2002 Protege5 there for the same price I bought it for a year earlier (from diff dealer), so I can’t complain too much…

Ok, so three positive, two negative. I messaged my friend Josh (Dukethug) to get a little more detail on his friend who got burned:

Me: @Dukethug what was the nature of the burning? bad car? pricing? financing? just want to know where to keep my eye . . .

Dukethug: @dougwick iirc, it was a promised service arrangement that was not honored.

Dukethug: @dougwick as in, the car ended up having some problems carmax refused to fix.

It seems like both Dukethug’s and Atxryan’s friends got saddled with a car that probably shouldn’t have passed the 125 point inspection. Well this is where things got really interesting. At this point I receive a message – “CarMax Chris Wilmore (@CarMaxChris) is following you on Twitter.”

Clicking through to @CarMaxChris’s profile, Chris’ Bio reads “CarMax PR rep interested in sharing information about the nation’s largest retailer of used cars, car buying info, automotive content and social media trends.” Wow, so someone from CarMax “heard” me talking about them and reached out to me. So I take advantage of this access:

Me: @CarMaxChris Does CarMax allow inspection of vehicles by third party mechanics prior to purchase?

CarMaxChris: @DougWick Not prior to purchase, but all used CarMax cars can be returned for any reason within a 5-day period with our money-back guarantee

Well that seems reasonable, and plenty of time to get the car to a mechanic for our own third party inspection.

In the end, I got five great pieces of feedback from my network and a connection to the service I’m thinking about using who took the opportunity to address my concerns. I already like CarMax even though I haven’t set foot in one of their stores. This all transpired in the course of just about 3-4 hours.

This is a practical example of how an open publish:subscribe model for the world can become extremely powerful, and why it might be worth it to join Twitter.

Now think about if a mechanic in Austin had heard me mention “mechanic” and checked my location data to know that I live in Austin? They could have chimed in and potentially won some business. Or someone from my local CarMax to ask which car I’m looking at? Insurance providers? Financing? The DMV? They might all someday add value to this conversation because I raised my hand started talking about needing to buy a car. Good marketing – the kind I want to hear because of what my needs are right now.

The cardinal rule of Twitter is that you show your network some gratitude when they help you out:

Me: Thank you @atxkat @atxryan @doogsatx @dukethug @ScottIngram @baldman and of course @CarMaxChris for the CarMax feedback. Twitter FTW!

CarMaxChris: @DougWick You’re most welcome. Hope to see you in soon.

Atxkat: @Dougwick I would definitely recomend having a third party give it the once over… @drosko would agree

Now while I was going to go to CarMax anyway, and it was nice that he answered my question, there is a big opportunity for CarMaxChris to go above and beyond. He could track down @atxkat, @drosko, and @dukethug’s friend (it would just take a few minutes) and try to win them back as customers. That is where the real power of listening into the network, from a company perspective, is so powerful – and could change everything about how companies market in the future.

Facebook Connect: An Open Invitation to the Party

mashable_sxsw_v1_posterThis post was originally published over on the Powered Blog, The Engaged Consumer.

Have you ever been so steeped in something that you see it everywhere you look? Standing in the middle of the Powered-sponsored Mashable party during South by Southwest Interactive, beer in hand and exploring the various rooms of the Six night club, I started to think about Facebook Connect. Yeah, this is how bad it’s gotten.

Facebook is a party. It’s a huge place where you can share content and news, play games together, engaging in many of the activities you do with friends in the offline world. The problem is that the party, up until now, has really just been for Facebook itself and its users. If you were any entity with commercial interests, the best you could do is give Facebook a banner to hang somewhere for you. This would be like if Powered sponsored the Mashable party but we could only hang a banner inside the bar. How effective would that be for our marketing, over the din of the music and rumble of conversation?

With Facebook Pages, now you can attend the party. You’re just like I was at Six, a sponsor floating around the crowd, having a few conversations and talking about Powered. This is much more effective marketing-wise than a few banners (at least I think so!), but still I’m just one guy and although there were a few other Powered employees our impact at the event was still limited. This was compounded by the reality that people didn’t always want to talk about Powered, a fact that is even truer in the personal-conversation world of Facebook – which is about as far away from an industry party as you can get.

Facebook Connect is really where things get interesting. It allows you, as a brand, to have your own room in the bar. By that I mean you can build your own communal experience and attach it in a meaningful way to the Facebook experience. People can walk into your room, find the people they already know, and message people outside the room about the cool things going on there.

Word-of-Mouth Traffic Flow

This doesn’t absolve brands from creating an engaging experience in their own community environment. You still need to populate your room with interesting content, people, and programming. But it really helps with one of the main problems branded communities have, which is getting people in the door. There is only so much you can do with email marketing, media promotion, and search. Here, Facebook runs the party, and you just hook into their flow. You are instantly rewarded for creating engagement, versus having to create engagement and then work hard to get the word out.

The Power of Context

The reasons why you would build your own room (Facebook Connect) versus just attend the party (Pages) are similar in both the online and offline world. With Connect, you gain context. Everything that happens in your community is in the world of your brand, versus the world of Facebook. Context is extremely powerful in the user’s mind, and it has a lot to do with building people’s brand affinity, advocacy, and loyalty. Does reading this blog entry on the Powered blog make you attribute the value to Powered, or to me (Wick, Doug Wick)? How would that change if you read it on my personal blog? If you walked into the Powered Room at the Mashable Party, how would this be different than just meeting someone from Powered?

Learning Ability

Also, with Connect comes data. Your ability to listen and learn as an organization is significantly enhanced when the technical handoff between Facebook servers and yours happens. What if the Mashable party went on indefinitely (I felt like it might at some points) and you never adapted your room to be more reflective of partier’s preferences or need – or even just freshened things up a bit? If you don’t have the data, you won’t have the visibility into individual behavior on a quantitative or qualitative level. You won’t learn or adapt as effectively, and you’ll start sounding like that boorish guy who’s always at the party saying the same things. Yes, we’ve heard that story about how you went bungee-jumping in Cancun eight times, thank you very much.

So now that you’ve been invited to the party, will you get in there? Or will you sit at home and let other brands have all the fun?

Watch out for the “Nell” effect

nellToday at work we were discussing the prep for a big presentation next week, and getting into some pretty esoteric discussions (as we usually do) about how to communicate the vision and direction of our company.

One of the issues with what we do is that we are not only in the marketing world, but we are also in a subdomain of marketing (“social marketing,” or basically building communities online for marketing purposes). The social marketing world deals with a lot of pretty innovative web tools and a lot of specialized terminology that many people, even professional interactive marketers, don’t understand completely yet. In prepping for any presentation outside Powered’s four walls, we have to be cognizant of that. If we don’t constantly stay vigilant we run the risk of speaking in a language our audience can’t understand.

In more general terms, this is the “Nell” Effect, referring to the 1994 movie starring Jodie Foster that received mixed reviews like “Stunningly awful on almost every level.” But useful for a blog post!

In the movie, Jodie plays this woman who basically grows up in complete isolation from the world. As a result, she has invented her own language and built a completely unique world view. Neither of these translate to the world we know very well. Of course, in Hollywood fashion the movie tries to show us that our world view isn’t as beautiful as Nell’s, but Nell isn’t trying to make it in the private sector either.

I think we’ve all experienced the Nell Effect before, though, in various places where we’ve had an immersive, shared experience. When I graduated with my MBA, it was extremely difficult to get to where I was talking and writing like a normal person again – and not using terms like “sustainable competitive advantage” when talking about my favorite places to eat. Of course, my MBA classmates would know exactly what I was talking about!

While it’s important to internalize the learnings from each of these closed environments, you have to find new ways to express them once that environment has fallen away. When have you experienced the Nell Effect? Are there still traces of it in the way you talk, or the way that you write?

Music should look like professional sports

Famous football songsI was understandably rankled when I read about the recent merger between Ticketmaster and Live Nation. Just when we were getting some competition going in the live ticket sales industry, we’re going back to the monopoly. In the article, the writer tried to put a positive spin on it by saying that perhaps now they’ll go to an auction-based ticket sales format so that artists can get paid the true value of their performance (much of which is now captured by Stubhub and ticket agencies on the secondary market).

The thought of an auction is a bit scary. Demand for hot show tickets in most cities is out of control, with individual tickets to most desirable shows going for 2 to 3 times their base sales price – typically hundreds of dollars each. It seems like you’d be able to see a lot fewer shows than you do in the current system.

But for the sake of comparison, let’s look at another public-venue entertainment industry: professional sports. One of the reasons professional athletes get paid as much as they do is because of the economic concept of “rivalry.” Simply put, rivalry identifies whether a good or service can be enjoyed at the same time by more than one person. For instance, only one person can eat my box of junior mints. Therefore that box is only worth the three dollars the movie theater overcharged me. However, the movie we sit down to watch can be enjoyed simultaneously by everyone in the theater. That is why one movie can be worth hundreds of millions of dollars (if it’s any good).

Professional sports teams and the athletes that play for them know this. They do as much as possible to get their on-field activities in front of as many people as they can. People pay top dollar to attend events, with ticket prices set close to market price, and then the leagues have massive TV contracts that bring the events to people all over the world. Merchandising and celebrity-athlete spokesperson contracts are for huge amounts of money, fueled by TV availability and awareness (the Dallas Cowboys, Chicago Cubs, and Notre Dame Fighting Irish all excel at grabbing national attention, which is why they are more valuable than other teams in their leagues).

So why aren’t rock concerts like that? Why can’t you watch them all live on TV (I know some of them are on pay-per-view, but that doesn’t count)? Well, I’ll point an accusatory finger (again) at the packaged media business. By putting musical content on to a tape, a CD, a DVD – by slapping DRM technology on digital downloads –  media distributors are trying to introduce rivalry into a medium that is characteristically non-rivalrous. Follow me?  Music is intangible, abstract – not at all like my junior mints. When people say that “music wants to be free,” they don’t mean without cost. They just mean that it, by its very nature, is supposed to be enjoyed by more than one person at the same time.

The economic reality of music and the musicians that produce it is that they are like professional athletes, and that economic reality is now causing a collapse in packaged media sales. Because you just can’t fight the nature of something.

What do record companies do? Is the music industry going shrink or even <gulp> collapse? No, not at all.

A big part of the solution is to follow the lead of professional sports. Raise tickets prices so your “athletes” get paid what they’re worth. Don’t fire everyone who works in your packaged media business. Move them over into a new type of distribution job for “ConcertTV” channels 1-20 that air live concerts of all types from all over the world on cable, 24/7. I’d pay $15 a month for those channels. With this increased personal exposure for artists, ramp up the merchandising and sponsorship dollars (there is so much that could be done here that isn’t being done). More distribution and marketing jobs there, too.

The side effects of this approach? Prices for albums lower further to a price that lets more people enjoy more of the good stuff (25 cents a song, anyone?) – music becomes more accessible and demand is further stimulated. Supply follows: Bands tour more, more venues are built, more musicians can actually make a living doing it on the low end – music becomes bigger and more diverse. Bands that can’t actually play their instruments, are supported only by good production and marketing, or write albums full of filler can’t put on a decent show and fail – music becomes more about talent and quality.

I for one think the above realities will come to pass regardless of what the record companies do, and I’m pretty excited about it. But I’d like to see the record companies continue to employ the good people they have, I’d like to see the transition happen faster and with less heartbreak. So here’s hoping that sometime soon, during a Sunday afternoon football game, a few record executives have epiphanies.

Photo Credit: Originally uploaded by Mark Sevigny