Products Scale, Services Don’t…but…

Products companies scale more easily than service companies. Fair enough.

Which, however – product or service – are artists? Essentially, they’re both. Too often, however, artists view themselves as service companies, with the occasional product thrown in (merch for musicians, books for authors, etc.) as an afterthought.

Simple economics tells us that as demand goes up, prices must rise. What economists don’t tell us (know any rich economists?) is that when you raise prices to correspond with rising demand, you often leave money on the table.

Sure, there are apparently a near-endless stream of customers willing to pay increasingly high prices to see certain artists perform (they are paying for a service), but you know that there are countless others who simply can’t afford $100+ tickets (and in an age where price elasticity of demand is very high, you better be careful about how high you raise those ticket prices; this summer’s concert season emphatically demonstrated that). By not offering these customers some product that acts as a substitute for the service they can’t afford to go see (i.e. concerts), money is being left on the table.

It used to be for musicians that this substitute product was a CD (perhaps a live DVD). It’s a bit trickier now as streaming is essentially replacing the physical or digital “product.” Any recording artist will tell you that, currently at least, the revenue from streaming is almost laughably low.

You realize of course that when Steve Jobs talks about (however trutthfully or not) how the iTunes store doesn’t make money, he’s showing us the primacy of products (iPods, iPhones, iEtc.) over services (running and maintaining the iTunes store, which is essentially a service for the labels).

It’s why Jeff Bezos pushes the Kindle soooo hard: it’s Amazon’s lone product in their otherwise service-oriented business.

The challenge, therefore, for those of us who are essentially in the service industry is to determine how to scale while not leaving money on the table. It comes down to reinventing our product offerings.

To be clear, this does not mean (exclusively) more touring (which seems to be the default answer). That’s a service, and, believe me, you can’t really scale that quickly and sustainably.

No, it’s about products.

You have to have a “thing.” Something that can work for you even while you’re not working. The good news is that the channels are there. The middlemen are increasingly being cut out, and now when you develop that “thing” it’s far easier to get it from creator to constituent.

Have a look, for example, at how Seth Godin has elminated the middle man, and uses existing channels to bring his “thing”/product to his constituents:

When you begin thinking about your service elements (being in front of customers) as a way to increase your customer base for your product rather than for your service, you’re on the right track. The iTunes store is a way for Apple to increase its customer base for iPhones; Amazon’s massive storefront is a way to leverage all of those content owners’ work (their books) so that Amazon can increase its customer base for Kindles; Seth Godin’s blog/Twitter account/speaking engagements are ways to increase his customer base for his books.

So, artistic service provider get out there and increase that base, but make sure you have a product that makes money for you while you sleep.

Tags:

Reply

Your email address will not be published. Required fields are marked *