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The EvO:R Street Journal
The EvO:R Street Journal
Dedicated to the culture, business and interests of the indie artist.
EVJ delivers controversial points of view, hard-news commentary, Industry Insites,
artistic prose and photography and welcomes responses (pro or con),
feedback and topic suggestions from readers. If you would like to
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What The Music Industry Can Learn From The Real Estate Industry
By Gian Fiero
As I was watching the news the other day, a story came on about the skyrocketing number of foreclosures
that are taking place across the nation. There was an interview with a couple who blamed their situation
on their commission-hungry agent who sold them a house for which they were not qualified, their
unscrupulous broker who "creatively" structured a loan that they could not afford to make payments on,
and their uninformed friends for giving them bad advice. They basically blamed everyone - but themselves.
Gian Fiero is a motivational teacher, speaker, author, and entrepreneur. He has been
a business advisor for the U.S. Small Business Administration in San Francisco,
California, and currently teaches Publicity, Public Relations, and Career Planning
at San Francisco State University.
It got me thinking about what the music industry can learn from the real estate industry and the parallels between the two.
Like the real estate industry, the music industry is a percentage based business. Both have their own esoteric language and both rely on a cast of revolving characters who play a variety of roles. Both are relationship driven. Both are service oriented in nature. Both thrive on deductions and hidden costs that impact price and profits. And obviously, both have ups and downs.
But there is one major difference: In real estate, nothing happens without financing.
In the real estate industry, when you are serious about buying a house, the first step is to find a lender who will secure the loan for you in order make your purchase. Once upon a time when music artists used to covet record deals, they did so because obtaining a record deal was synonymous with obtaining financing.
The chief purpose of that financing was to satisfy production and marketing costs. With the advent of the Internet and the resulting independent movement (which has been falsely promoted as the answer to the alleged oppressive business practices of record companies), many artists will never receive the kind of exposure that their predecessors have enjoyed simply because they will not have the financial means to do so.
In short, there is no longer an obvious and readily available source of funding for music artists. Record companies traditionally served this purpose, but that's beginning to change as artists seek, and find, alternative sources of financing (e.g. Madonna and her lucrative 120 million dollar deal with Live Nation) outside of the music industry. Superstar artists that is.
Aside from the financial issues, the main problems with music - and the music industry - are value, perception and relevance.
In real estate, the mantra is: Build it and they will come - with financing to purchase it because in the end it's not really a purchase; it's a sound investment that will yield future dividends (in most cases). The same can't be said for CDs which (by public consensus) only have two good songs out of 10 or 15. That's called a bad investment...and a good business opportunity for iTunes. By now we all know iTunes is not really about the legal purchasing of music, it's about the selling of iPods, and for people 15 - 25 (still the target age audience for the music industry) the perception is that music should be free. That's with or without an iPod.
So how do we achieve that relevance? What pertinent lessons does the real estate industry provide
to help the music industry straighten things out? Here are some:
1.) ESTABLISH VALUE
People buy houses as a commodity, but they live with their families in homes. The real commodity of the music
industry is the emotional connection that people have with artists through their music, not the plastic CDs
they buy. When people find an artist who provides the music that they can use as the soundtrack to their lives,
they embrace them, celebrate them, and reward them. It's the emotional experience and the guarantee of it
that people associate with artists when they are purchasing their music, merchandise, concert tickets,
and now as in many cases, movies tickets. It's when that guarantee is not upheld that people feel
disappointed. Greater care and greater measures need to be taken to capture, portray, and present
the emotional value of an artist and their brands.
2.) BUILD EQUITY
Equity is money that is earned above the estimated value of your property. The process of earning equity
- which takes place over a period of time - is called appreciation. What determines how much the value of
your property appreciates is based in comparison to the rising value of surrounding properties in your
area. These comps are obtained when you get your appraisals done (see 3 below). If you are a music artist
or music producer, it behooves you to compare yourself to others with similar track records - not talents
(talents are too subjective). Therein lies your estimated value. A track record of delivering consistent
quality work over a period of time, will help to build equity in your brand that you can profit from.
The same holds true for industry professionals and companies who provide products or services.
3.) GET FREQUENT APPRAISALS
Because property values fluctuate, influencing whether prices go up or down, it's critical to
know how much your house is worth so you can sell it at market value if you choose to do so.
This is done by getting an appraisal. Who do you get these appraisals from in the music industry?
Your customers and clients. Ask them what they think of your products/services and how you can make
it better. Most importantly, immediately incorporate that feedback to increase your value in
comparison to your competition. People are always willing to pay more for value.
4.) BECOME ACCOUNTABLE
Anyone who has ever bought or sold a house can tell you that the transaction entails the signing
of tons of documents. Each one of them requiring your acceptance of the terms of each agreement
for which you are responsible for knowing and honoring. The same is true of agreements in the music
industry. Unfortunately, most people don't even bother to read, much less understand these
agreements. You don't need to be a lawyer to read a document (although some people are willing
to pay a lawyer to read documents to them). There's greater accountability in the real estate
industry because lack of accountability on any one person's part has a domino effect which
clogs the cashflow, and in turn, impacts the bottom line.
5.) BE PROFESSIONAL
The one thing that I absolutely love about the real estate industry is its professionalism.
The players in real estate are all united under one umbrella and committed to one cause: buying
and selling houses. They all have mission critical tasks that force them to communicate efficiently
with each another, and their success is contingent upon the sharing of vital information and
resources. In the real estate industry, unprofessionalism is not tolerated. There are ethics
and laws that regulate conduct. Most importantly, there is a timely and accurate division and
distribution of profits from the sales which compensate their professionals.
Just imagine if we were all united under one umbrella and committed to one cause in the music
industry...what a thought. The time is past due for artists, professionals, and companies to
trace their footsteps and find out how we ended up on this slippery slope, and devise plans
that will take us in a different (i.e. more profitable) direction. If not, we will soon be
blaming everyone for the situation that we are now in - but ourselves.
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