🔵 What the music industry can learn from Nike's disastrous 2024

Another case study for brand building versus 'immediate returns' marketing

Hi there -

An article was shared in our company Slack this week by my colleague Tom: “Nike: An Epic Saga of Value Destruction” It’s a long read, but eminently worth your while if you’re an MD, Head of Marketing or in another leadership role relating to driving sales within your business.

In the article, the author details how Nike managed to wipe $25 billion dollars off its market cap in one single day when it revealed its financial results on June 28th of this year. Over the previous nine months to that point, over $70 billion had been wiped out.

Graphics speak louder than words:

The article details the various ways in which Nike absolutely got it wrong since hiring a new CEO (now ejected, unsurprisingly) back in 2020.

So what has this got to do with the music industry?

For me, at least one cornerstone of Nike’s error speaks loudly to the ways in which music is marketed in 2024 (and arguably has been for some time now). Specifically, an over-reliance on immediate returns and an obsession with focusing only on visible metrics.

Nike’s mistake in the marketing space was that it switched to only focussing on performance marketing (i.e. driving sales) at the cost of brand building. All marketing was spent on serving and retaining demand, and not on creating demand to start with.

In essence, Nike was no longer focusing on brand creativity anymore; it was solely looking a constant supply of ‘stuff’ to wave at people, with no wider context as to why these items were the ones to buy amid a host of options in a crowded market.

This rang a few familiar bells in the way I see music being marketed a lot of the time. In short: focus is still spent far too much on driving people to the consumption points, with far less time and energy being spent on what the experience of engaging with that artist actually is.

To put it even more reductively: a lot of money can be spent on a poorly-made ad, telling people to just buy the album or go stream it on Spotify (or your DSP of choice).

Artists are brands. Arguably, they always have been, but I think everyone spends a lot of time in denial about that, as “brand” feels like a marketing term from the corporate landscape, which people feel is ideologically opposed to the world of arts and culture.

Except…. it isn’t. Any item you might spend money on is a thing that requires marketing in order to drive awareness of and connection with it. Yes, some of those things are entirely bland - soap powder, bedding, cat litter - but others are not; think bands, artists, events and entertainment. They all require connection in order to have people buy in. If you’re building that visibility, connection and audience, well, you’re a brand.

This, I feel, is where marketing is now going so badly wrong in certain parts of the music business. The obsession with chasing brief moments - viral hits on TikTok for example - has left people missing that building any long-term brand requires investment into driving awareness of and connection with that artist and their work. Nothing long-standing arrives overnight; that is a myth.

I would love to know how much money is ploughed into paid marketing (for one) where the ad is essentially asking someone to listen to or buy an artist’s album, versus marketing of all types that simply aims to drive connection with that artist and their music.

Not all success is directly measurable; marketing is, ultimately, a game of influence. You are looking to influence people into considering your product over others. Now, if that sounds like a very corporate statement, I would argue that marketing only gets ugly and corporate in tone if you are pouncing on someone who has barely heard of your band, demanding they stream or purchase the new album. That is blunt, short-sighted marketing. Playing a longer game of connection and influence is not.

There are other angles to Nike’s errors that also warrant a degree of reflection relative to the music landscape in 2024. “Superfan” is the new bon mot suggesting that there is a wealth of untapped value amid the most hardcore of fans - and that, of course, the record labels are the best people to unlock that.

Nike took a similar view, diverting attention and resources from building its brand to simply super-serving a smaller number of superfans, aiming to drive high volumes of sales from a much smaller audience.

How did that work out? Well, I refer you to that graph above. Labels: beware the degree to which you might funnel budget into superfans rather than spend it on continually growing your audiences.

Arguably, Nike was also guilty of a focus and reliance on tech solutions over experience and relationships. It attempting to be an entirely D2C business, retailing directly through its app. It soon learned that if Nike shoes weren’t in stores, people did not migrate to the Nike app; they simply bought other brands of shoes. It laid off all its wholesale experts who held down great relationships with stores, and decimated its revenues in the process.

I don’t feel that has a direct comparison in the music space, but as I see major labels making huge cuts in the name of “efficiencies” and Warner’s strategy appearing to suggest it becoming more like a tech company, I see red flags popping up all over the place. Just how many experts, with complex, valuable relationship networks, have been made redundant with the intent of replacing them with technical processes?

(Sidenote: I note that McKinsey were involved in assisting Nike’s catastrophic decision-making, which is interesting when I know that at least one massive music company is also using McKinsey to advise on similarly radical moves. But I digress…)

Perhaps the over-arching points here are as follows:

1. Marketing is about communications, connections, relationships and influence. That is a long-term process that requires investment. It also comes with a significant amount of nuance. “Not all success is measurable” as my colleague Tom Packer said earlier.

2. Tech is not the answer to everything. Is it a facilitator? Absolutely. Is it the solution in and of itself? No, definitely not, and anyone telling you otherwise should be approached with caution. A good example would be ad platforms: yes, they can target people to a granular level, but if your creative stinks then you are wasting your time. Ergo, focus on what is actually creating the connection for the most part and not just the channels through which people will be reached.

Implementing changes like this are never easy. There are businesses in which people’s roles are literally dependent on them maintaining or exceeding metrics that might, in the grand scheme, actually be a poor indicator of genuine success.

Fundamental reviews should be undertaken as to how marketing is approached. Understand what parts of that process require investment.

Equally, avoid anything built on quick results. What comes quickly goes quickly. Snapping up those TikTok hits might provide a (fairly lazy) bump on the bottom line, but people will have forgotten them in a year’s time. Investment into a long-term future requires commitment and faith in what one is working on. Let’s not forget that.

Finally, one irony of the Nike’s travails was that arguably its biggest competitor, Adidas, had all of these issues years before them, and detailed how their change in strategy had improved their financial results, back in 2019, right before Nike hired their new CEO and made this catastrophic change in direction.

In short, it was all totally avoidable.

Have a great evening,

D.

🎶 listening to “Rack” by The Jesus Lizard. I’m steadfastly of the view that all Jesus Lizard releases up to (but not including) “Down” are stone cold classics, which have also aged wonderfully. So, with the band now touching down with their first album in about 26 years, there was always a concern that this new LP would be watered down and generally a bit of a let-down. Happily, that is not the case at all, with “Rack” amounting to easily the band’s best record since that peerless run that ended with the Lash EP back in 1993. Welcome back gentlemen!

📺 watching “We tried Meta's AR glasses with Mark Zuckerberg” on YouTube. This makes for an interesting insight as to where tech is headed. I still feel these have a lot of great use cases… I’m just not sure they need to be a product everyone owns and builds a dependency on, in the manner we have with mobile phones.

🤖 playing with dictation and transcription in Chat GPT’s mobile app. Of late I’ve had to write a bunch of entries for our company wiki. Dry stuff. However by using the GPT mobile app, I can instruct it to take my spoken comments, transcribe them, and then turn them into formal notes for a company wiki. It’s a huge timesaver and a terrific use case for the mobile app. Give it a go.

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Stories worth reading from the Music Industry:

The music industry is entering the era of “Streaming 2.0” and could be on course for 2 billion paying subscribers says Universal Music boss Lucian Grainge

This means that “music subscription remains significantly under monetised” and that there is “an opportunity to increase ARPU across all platforms and all markets”. That increase in ARPU will be achieved by “increasing revenue per subscriber” as well as by “closing the value gap between paid and free ad-supported streamers”, but also by “engaging with super fans with new products and experiences that unlock their spending potential”.

👆🏻Hot take: personally I feel there’s conflicted strategies at play here. UMG wants to increase Average Revenue Per User (ARPU) whilst continuing to push up subscriber growth. In recent years, most subscriber growth has come at the cost of ARPU, through expansion in territories like India and LATAM. I just struggle to see how both are possible when they seem - to me anyway - largely at odds with one another.

ByteDance is shutting down TikTok Music globally

“Our Add to Music App feature has already enabled hundreds of millions of track saves to playlists on partner music streaming services. We will be closing TikTok Music at the end of November in order to focus on our goal of furthering TikTok’s role in driving even greater music listening and value on music streaming services, for the benefit of artists, songwriters, and the industry,” Ole Obermann, Global Head of Music Business Development, TikTok said in a statement. TikTok said that it will continue partnering with music streaming services rather than competing with them. In February, the company launched “Add to Music” feature on TikTok that lets users add tracks directly to a playlist on Apple Music, Amazon Music, or Spotify.

👆🏻Hot take: I think it is plausible to suggest that this has been pulled after the majors (and Merlin maybe?) refused to do deals. Without that, there is no service to launch (worth the asking price anyway). Such an outcome would also make for a powerful manoeuvre against other DSPs, handing Universal for one quite an upper-hand in dictating how DSPs need to evolve.

There has to be a better way: How to overcome music industry overload

We’re all stuck in an endless sea of emails, text messages, lost links, long threads and overwhelming to-do lists that prevent us from working on the projects we’d like, in the way we’d like. The result? Long hours, missed opportunities, wasted time, frustrating tedious work, overwhelming stress and the impending threat of burnout. There has to be a better way.

👆🏻Hot take: I certainly agree with the author’s assertions here, and I do feel without question that all businesses in music could be far more effective in how they operate. However I didn’t find myself agreeing entirely with the proposed solutions here. Yes, some will certainly help (e.g. better project management) but others feel like a bit of a reach. Still a great article to read though. [Post-publishing update: on reflection I feel I was a little harsh here. I think the points raised are all good, valid ones - I think my issue is just that I feel change requires buy-in at a might higher level than this. Truly ‘fixing’ how we do business needs support from the very top, and it is a complex problem to solve)

Fan Pages Are Becoming Artists' Useful — and Cheap

To help promote bbno$’s “It Boy,” the rapper’s team “had close to 60 fan pages pumping one to four posts a day,” says Sam Alavi, who co-manages the artist. They covered “a myriad of different content types: Some were anime focused, some were bbno$ focused, some were clips of old podcasts bbno$ had done, and then they ended with ‘It Boy.'” The single peaked at No. 10 on Billboard’s TikTok Top 50 chart in July.

👆🏻Hot take: for me this feels like everything wrong with music marketing in 2024. Flooding the plain with millions of posts just feels like you’re adding to the din, and I simply don’t know where this all ends if that is genuinely considered a workable strategy.

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Notable news from the world of tech:

Meta Orion glasses and Snap Spectacles offer a look at AR future

Snap’s Spectacles, and Meta’s Orion glasses, do offer a fascinating look at the future of personal computing—a future that now appears just years away. However, they also show why it’s been so challenging for tech companies to make AR glasses, and why none of the big companies are ready to turn their prototypes into mass-market products just yet. Or as Zuckerberg put it this week: “The technical challenges to make them are insane.”

👆🏻Hot take: on the one hand I like aspects of this tech, but when considered in the context of a “Big Tech wants you entirely reliant on Big Tech” viewpoint, it feels like a move to replace the phone with something even more intrinsically invasive to your daily life. Granted, it doesn’t have to be… but I think that would be the likely outcome.

Discord opens Activities, in-app games and features, to all developers

Discord first launched a developer preview of its Embedded Apps SDK earlier this year, with some early partners launching games and apps such as Death by AI, Farm Merge Valley and Krunker Strike FRVR. Developers can not only build and distribute their apps within Discord, but also monetize: Activities supports in-game or in-app purchases and marketplaces. Discord also offers different tiers of growth, with its platform fees going from 30% to 15% for the first $1 million in gross sales generated by a developer’s app.

👆🏻Hot take: a smart move here from Discord, though I’m keen to see what it looks like in real terms. Could there be use cases for artists running communities on the platform? I don’t see why not.

Why is OpenAI planning to become a for-profit business and does it matter?

As a capped profit business, OpenAI’s for-profit unit limits the returns given to investors and employees, with the excess handed back to the nonprofit “for the benefit of humanity”. There is no cap on profit returns for a public benefit corporation. Anthropic, a rival to OpenAI, is run as a public benefit corporation. OpenAI has declined to comment on the specifics of the reported restructuring but has said the non-profit entity will “continue to exist”. Reuters also reported that the non-profit, and Altman, would own stakes in the profit-making business.

👆🏻Hot take: OpenAI is looking more and more suspect with every passing day. The latest exits at the very top suggest serious discord within the organisation, and this latest move (reminiscent of Google quietly mothballing the “Don’t be evil” maxim somehow) speaks volumes as to the company’s true intentions.

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Looking for something else to read? Here you go:

From vinyl to flip phones, why analog technology is making a comeback

Why the new luxury is flip phones and vinyl LPs

👆🏻Hot take: the notion of a more detoxed, digital-free life being a luxury that only the wealthy can afford is one I’d never considered before now. Some great points are raised in this piece - do have a read.

Jamie xx, history and the LOLification of dance music

How much does history matter to dance music?

👆🏻Hot take: I loved this thoughtful piece from Ben Cardew, weighing up whether Jamie XX’s album is just lazily plundering the dance classics of the past, or if as a journalist of a certain age (one that I am fairly sure I exceed, I hasten to add!), there’s a touch of the “old man shouting at clouds” about this. I certainly related to his points.

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Notes in dispatches:

• Our friends at Domino Records are looking for a Digital Marketing Manager on a one year Fixed Term Contract. Great label, great job, great people to work with. Details here.

• Music conference Fast Foward - historically one of the better conferences I’ve been to in the music space - is returning for 2025. It will take place in London on Feb 4th/5th. Tickets are available here.