Case in point, the music industry.

In 1999, the U.S. accounted for 14.9 Billion in record sales (CDs, albums, tapes, etc). Record sales (including digital downloads) fell to around 11 Billion in 2008. Forrester projects that number to be around 9 Billion by 2013. The music industry “hoped” that digital sales would increase their overall revenues earlier in the last decade. That is all but a pipe dream now. Unless a major innovation is announced soon, I speculate revenues will continue to decline.

Because the music industry can’t rely on record sales alone to create profits, bands must now tour and sell merchandise regularly to account for lack of revenue. Even the biggest (and some of the oldest) like Bruce Springsteen, Elton John, Eric Clapton, Billy Joel among others are touring the country providing the only marginal utility left for these musicians — opportunities to hear them play live. According to 70% of those who participated in a recent survey, ticket prices are too expensive. In spite of this sentiment, gross ticket sales are rising and so is attendance.

While record sales are a commodity, live music isn’t. Demand has, seemingly, never been greater.

With the recently approved merger between Ticketmaster and Live Nation (the biggest retailer and promoter now one and the same), I speculate musicians will choose promoters and agencies that will allow them to play in the best venues and have the most powerful reach to allow them to increase revenues. If the economy holds constant, I speculate revenues for the live music business to increase steadily.

The music business has a winner on its hands.

It’s also a good time for new original bands to make their mark. The reason music sales are so commoditized is because of outlets like Napster and YouTube which made listening and watching music to become almost free. On YouTube, consumers are watching musicians like Dave Carroll sing about how United Breaks Guitars or Jonathan Coulton wax musical about Code Monkeys. Bands playing original music, like the Elders, connect with fans by planning excursions or having drinks with fans before and after concerts. Also, bands are updating on Facebook and Twitter.

Its still an uphill battle for relatively unknown bands to make money playing music. One expense for bands: promotion. Bands pay promoters to get their show booked, advertised and sponsored. Another expense: ticket brokers. Brokers take a cut of every ticket sold. Ticketmaster is rumored to see around 40% of every ticket sold.

Live music is carrying the music industry. The demand for live music has never been greater. Conglomerates are consolidating and seeing record profits. And yet, why are so many (i.e. the fans) the ones paying the expensive ticket prices, so unhappy?

Because of the merger, Irving Azoff, the CEO of Ticketmaster, Michael Rupino, CEO of LiveNation and Barry Diller the Ticketmaster Chairman appeared before the Senate Judiciary committee last year to testify.

Rupino remarked:

“I would also like to get on the record that when people hear what Ticketmaster’s service charge is, Ticketmaster was set up as a system where they took the heat for everybody. Ticketmaster gets a minority percentage of that service charge. In that service charge are the credit-card fees, the rebates to the buildings, rebates sometimes to artists, sometimes rebates to promoters.”

Essentially, bands, venues and promoters are paying Ticketmaster to be the fall guy for the Music Industry’s woes. According to the testimony, the breakdowns experienced by fans are not due to the fault of just Ticketmaster and the promoters. The breakdowns are caused by the entire industry itself.

Keep in mind, because of the very nature of live music and the scarcity of the musician(s) performing, artists are able to set their own prices in the marketplace. If fans wish to see their favorite artists play live, fans will have to pay.

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Why aren’t more businesses doing this today? Why haven’t companies caught up to the revolution happening in the consumer marketplace?

Traditionally, companies make decisions for their employees about what devices they’ll support and applications they should use. The mobile device revolution is making companies think differently. According to a recent Forrester report, in nearly one-third of all firms, over 50% of employees use a mobile phone for work. IT could never keep up with the research necessary to be able to choose which devices to support.

That isn’t stopping them from trying. In some good news, according to the same Forrester report, more companies are beginning to include end-users in their decision making process.

In these type of applications businesses hope to use capabilities already existing on current devices and use them in, but most importantly FOR the Enterprise. As he illustrates, the accuracy of data can increase from a space around 10 meters to a few centi-meters.

I speculate that the demand for this type of accuracy will only grow. As demand grows, companies will be shifting their decision making process from more of a “command and control” paradigm to something a bit more centralized.

Enjoy the video.

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1. Think before acting – In the case study, my friend had already made a decision, long ago actually, that having an app on the iPhone was the right place for his business. There’s so much talk about the iPhone these days but ultimately its still a “walled-in” platform where only a subset of users have access. There’s lots of data out there to suggest that other platforms or architectures should also be considered.

In general, thinking is a good practice but one that small businesses rarely give themselves the space to do. Startups give in to the pressure of acting quickly and decisively. The premise of “Ready, Fire, Aim” (Aim is the thinking part here) is to do something quickly but also inexpensively in order to get some necessary feedback about your application. This iPhone experience for my friend was EXTREMELY expensive. But it might have all been avoided if they looked at other less expensive mobile platforms than just the iPhone.

“Aiming” is actually the most important part of the equation and not the “Firing.” In that scenario, you’re only doing something so you can begin to think . . . powerfully. If that’s the case, “firing” had better be low cost.

2. Be alert for what you are paying for – In general, the least expensive way to transact for something is with money, but keep in mind what it is, exactly, that you are transacting for. When you pay someone to build an application for you, are you just paying for the application? Here’s what you should also pay for:

a. Take care of your concerns – Your primary expertise is probably not Mobile application development or any type of development. These are rough and savage waters and you need someone to lead you and take care of you until the application is complete. You need someone competent and mature enough who knows how to move you and your business to a safe place.

b. Integrity – Dealing with people of Integrity is low cost in any of the ways we transact in business. As I mentioned earlier, this application has become extremely expensive for my friend. First, they still have no application that was contracted for months ago, all due to the cost of that developers integrity. What is the cost? Time? Money? Energy? Resources? All of the above. He spent his time worrying and waiting for the application to be finished. He paid the developer money that he’ll never get back. He spent energy trying to find someone else who will finish the application. And he’s trying to find resources to fund an activity (family, friends, business partners, etc.) that will help him achieve his business goals. Not to mention all the time he’s spent talking to his loved ones about how stressed he is that he can’t get his business to place he envisioned over a year ago.

c. A Partner – You may have contextual needs that you need to transact for as well. For instance, you may wish to project manage the activity yourself or you may not. You may need some help thinking and acting in other parts of your business. A partner is someone you can trust and can turn to when you face a breakdown. It’s better for your business to have really smart people around you no matter where you turn. Knowing those that help you think are powerful people to have around.

3. Understand the business opportunity – What is an average customer worth? How many more customers do you expect to have after your application is finished? How grounded are those expectations? Business owners who look only at what they can afford are typically only interested in earning what they need to make a living. If you have grounded an assessment that within a year you can expect to make 60,000 dollars and it will cost you 20,000 dollars to do it, 20,000 doesn’t seem like much of a cost at all. Many business owners, though, have no clear picture of the business opportunity before them and when they see a cost figure like 10k or 20k they might scoff and try to find anyone who will do it for a much lower price. See items #1 and #2 above.

What have I missed? What’s flawed? I’d love to read your thoughts.

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