Friday, July 28, 2006

Pitchfork Media

For those who are interested in independent and alternative rock, reading Pitchfork Media is a must. Without a doubt, it is the most comprehensive, insightful, and influential source of music criticism in this genre. There is an excellent article about Pitchfork by the Kiera Butler in the Columbia Journalism review that I would recommend to anyone with a passing interest in the “business of music”.

I’ve always been struck that Pitchfork is an under-utilized asset. The amount of spending on albums and concerts that it directly influences must be staggering. I spend relatively little on music and concerts (and practically nothing since I’ve gone back to school), but I’d venture that they’ve directly influenced about $100 of my spending per year. They have 160,000 visitors every day. Assuming their visitors come by once a week only, this translates into an audience of 1.1 MM unique readers (this estimate is probably a bit high, but should be in the right ballpark). If my spending is representative of the mean, that means that Pitchfork influences approximately $100 MM in spending a year; this is a huge percentage of the amount of money spent on indie rock albums and concerts.

Yet for all this influence over spending, Pitchfork can’t be making a more than a couple of million bucks a year. They have some rinky dinky adds for t-shirts and links to a music buying website (which I imagine pays them a commission), but the "company" definitely has a garage-quality feel to it.

Pitchfork has a fundamental business problem though. It is successful because it is objective, but it is also poor because it is objective. I’m sure the musical labels, retailers, and concert promoters would pay handsomely to get Pitchfork to steer some business their way. Doing so, however, would completely undermine Pitchfork as a an objective source of music criticism.

Providing information, analysis, and recommendations is an inherently difficult way to make money. Each of the ways I can think of to monetize this information has huge drawbacks:

Option 1: Sell out. As discussed earlier, this has huge drawbacks. However, shopping comparison sites like Cnet.com and shopping.com have very successfully given preferential treatment to vendors in exchange for fees. Google Adwords, has found a pretty neat way to do this as well by placing the sponsored ads on the side. However, empirical research has shown people are much more likely to click through to an advertisement when they have search intent not when they see some add next to the content they are leisurely perusing.

Option 2: Charge for access to information. This is tricky since charging subscription fees narrows your customer reach and therefore your influence. However, Zagats, CarFax, etc have managed to pull this off. It’s way to salvage some of the value you are creating but difficult to really grow this way.

Option 3: Focus on big ticket items. Many information-based car-buying sites do quite well because advertisers are willing to spend a bit to potentially bring in a large chunk of revenue. I really have no clue how this could apply to Pitchfork; I’m just throwing it out there.


Option 4: Get your paws on the rest of the value chain. The value pitchfork creates being spread out record labels, distributors (like Amazon), concert promoters, ticket exchanges (like StubHub). There are so many players getting money off of Pitchfork, it makes nearly intractable for Pitchfork to monetize this value by making financial agreements with these companies. They have an agreement with one distributor site, but that probably only captures a small fraction of the value creation. Pitchfork needs to cast a wide net and make agreements with all of the major parties that are profiting off them. If someone goes to Pitchfork and views a review of new band, Pitchfork needs to be paid if a week later that person buys the album on Amazon or purchases a ticket through Tickets.com or StubbHub. There are easy to implement technical solutions to achieve this, but Pitchfork needs to go out and demand to get money from all these parties. My guess is Pitchfork needs to hire one bulldog, and make he/she antagonizes the heck out of the music industry until they comply. All you need is a few players to agree and the rest will fall in line.

Just this last weekend, Pitchfork put on a massively successful concert in Chicago. This is certainly a step in the right direction, but still the company is only being compensated for a fraction of the ticket sales that they influence in the industry.

1 comment:

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