The music industry has done a lot for the development of business models and strategies for online sales, loyalty programs and methods for cross promotion.
In Australia there are a number of companies braving the dot-com doldrums and forging ahead using the Internet to expand existing music-oriented businesses and develop new ones. Some may even become profitable. But as the hardline bean counters and sceptical investors continue to impose the strict adages of traditional business practice, the thing most likely to ensure the success of these vulnerable companies is, believe it or not, "free stuff" - the cornerstones of building customer loyalty.
Just look at Napster. It's never been quite clear whether the infant founder of one of the greatest revolutions in the music industry actually made much money directly from the service. But the fact remains that the company was able to generate massive amounts of traffic and interest from around the globe. Its depth and breadth of information and massive reach through the online medium spread fear among music industry heavyweights like nothing had ever done before. Although the big companies succeeded in having the site taken down initially, the extent of their ultimate capitulation said a lot about how small companies can empower themselves with the Net.
As Phil Tripp, co-founder and director of leading online music promotions and information company Immedia puts it, the online music game is teaching companies about "data-drug dealing - once the fans are hooked, you have them forever". Immedia was established 15 years ago as the first online music promotions company in Australia and now turns over $1 million a year.
Immedia has been using the Internet to promote Australian musicians locally and abroad since 1995 and has helped the careers of such veterans as Midnight Oil, The Church, John English and the Eurogliders. The main source of revenue for the company is its directory, or what Tripp calls the "yellow pages" of the music industry. Immedia's music industry directory was set up in 1988 with $10,000 from Austrade and is now widely considered the bible for record business executives. Apart from its public relations arm which promotes other home-grown online music outfits, the rest of the organisation's activities are about delivering free stuff for cross-promotional purposes.
Immedia co-hosts Australia's annual online music awards, ONYA, and music.com.au, - "the benevolent music portal" with freely accessible information on just about everything in the music industry.
While accounting may be concerned about the amount of free stuff, Tripp figures it will pay off through promotion of the company's other services. "Word of mouse is really what we are about," he says.
ASX-listed publishing company Terraplanet set up in 1993, publishing a variety of magazines with subjects ranging from architecture to fashion and classical music.
Hurtling along with the mass exodus to the cyber world of the late 1990s, the company made a commitment to go online in 1999, and now offers music services including audio and video downloads, chat rooms and album and merchandise sales.
Company director Toby Creswell admits that the tech downturn has hit the company hard, but he is nevertheless quietly confident that its emphasis on building loyalty through the site will ensure the success of its online strategy.
Terraplanet has 40 staff, a small
proportion of which are employed in the online section, although Creswell expects this to increase markedly over the coming years. "Music is becoming more Internet-friendly, and as a result we are able to push ahead more easily and build communities online - which is what this business is all about," he says.
He admits, however, that adverse
market conditions have forced the company to focus harder than ever on achieving this goal. "It's a whole new ball game so we'll have to take it as it comes. Who knows what will happen? But we are taking a
Well known online music sales site ChaosMusic was the first Internet company in Australia to deliver audio downloads. It understands very well the reason for all the fuss behind Napster.
Back in 1998, Chaos completed the development of - and released - its "Liquid Audio" server, which offered cyber fans an earlier version of the now pervasive MP3 music format used by Napster. "We are not just an online retail company," says the director of ChaosMusic, Victoria Doidge. "We are the pioneers of music downloads in Australia."
As well as a sophisticated download service, Chaos also provides online chat rooms, regular news and information, and of course a shopping mall for CDs, video, DVD and other merchandise.
"The response has been tremendous," Doidge says. But the true asset of ChaosMusic, she insists, is its "Chaos Agents". When people visit chaosmusic.com.au, they have the option of registering as agents, thereby exposing themselves to a raft of competitions, special offers and push information services.
Advertising through its music industry newsletter is the main source of revenue for Chaos. It also makes a small margin on music and merchandise, but the other services are free. But with 130,000 Chaos Agents registered online, it's hard to fault the company's strategy.
"We are really focused on establishing loyalty with our agents," Doidge says. So much so, she continues, that thanks to constant questionnaires and the freedom of agents to make suggestions, "our members almost own the brand".
When you think about music styles that generate seriously intense levels of fan fervour, it's hard to go past metal. Whether it's heavy, new wave, thrash, speed, funk or death, the small yet vocal tribes of long-haired, head-banging, air-guitar exponents who follow this thread are, according to Roadrunner Records Australia head Jon Satterley, very hungry indeed for all things hard and fast in music. Roadrunner is the main specialist label for metal bands in Australia. And in response to the fans' appetites for information about the groups, the company developed metalshop.com.au.
The site was inspired by the strength of sale cards distributed with CDs and returned to the company by fans eager to access more information and special offers. After collecting an impressive 28,000 cards, Roadrunner set out to produce what is now the leading metal newsletter in Australia, Outsider Magazine.
"After that," Satterley says, "it was a natural extension to take it online." And it's looking like becoming a hit. "Once Roadrunner realised it had this incredibly loyal following, we could see the value of really getting behind the site and doing everything we could with it."
Sales do take place on the site; but like many online music sites, the priority for Metalshop - at least in the short term - is, once again, the "free stuff". For those interested in buying any of the latest metal, "Smash and grab" has been renamed "Buy shit".
But the really "good shit" includes regular news updates, various guest columnists from around the world, and a section where fans contribute reviews and ideas, submit classified ads and even create their own sites off the main server.
If you thought metal was a niche market, you are only half-right. Bands slightly more dangerous than average to the inner ear have until recently tended to exist underground. Yet in a recent study by online music research group hitwise.com.au, metalshop.com.au was found to have chalked up an average of 1 million page impressions per month, placing it in the top 200 Australian sites across all categories.
Satterley is critical of the so-called online youth brand entities that fell after April 2000. He describes them as being "too hung-up on what they thought was hip and cool" without "actually bothering to find out what the fans want".
That is certainly something you would expect to separate the online businesses that cut it from those that don't. And in the wider world of e-commerce where mouse clicks speak volumes, extending the same courtesy to prospective customers that these companies afford their fans will ultimately mean more success.