An important business lesson for musicians

I'll make this as non-boring as possible 🍦🍦🍦

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Remember the first time you saw a frozen yogurt lounge?

For decades, frozen yogurt was a lame-o dessert, reserved for grandma’s with digestive issues and maybe a few people in Portland.

But ~ 10 years ago, frozen yogurt lounges started popping up EVERYWHERE.

Someone cracked the code on how to make “froyo” cool by creating a self-serve, trendy spot with hundreds of toppings and a “healthier” vibe than traditional ice cream shops.

I distinctly remember the first time one of these lounges popped up in my hometown of Scranton, PA (yes, The Office), and for months it was PACKED with young teens and hot grandmas with digestive issues.

A few months later… another froyo lounge popped up.

Then another.

Then another…. and another.

And whilst the grandmas were working overtime to take down all of the additional supply, there was simply too much froyo to bear.

Suddenly, nearly every froyo lounge in the greater Scranton-area went out of business.

“So what happened and why the f*** are you calling them ‘froyo lounges’!?”

Well my friend, this froyo phenomenon illustrates an economic principle that literally RUNS your music career, you just probably don’t even know it exists.

In microeconomics, it’s known as “economic profit in competitive markets”, but for the sake of this article, I shall call this…

“THE FROYO EFFECT”

Here’s the principle according to Google:

So the froyo effect essentially suggests that the moment someone starts making profit from a new idea, new competitors will flood the market (unless there are significant barriers to entry) and erode their margins until NO ONE is left making money.

How fun!

Also… sounds familiar doesn’t it?

Ironically, around the same time the froyo lounges were booming + busting, music streaming services like Spotify + iTunes were deconstructing the barriers to entry for distributing music.

And, just as the froyo effect prophesied….. new artists flooded the music industry, increasing the supply of music and decreasing the value of a “song” to nearly $0.

And much like the yogurt lounges that collapsed shortly after the initial boom, many independent artists who flooded into the music space quickly learned that all the money had already been made, and lost loads of money trying to break in.

Like a spider that sucks the life out a dying fly and disposes of its useless carcass (poetry), the froyo effect led to the complete annihilation of the traditional music industry as a profitable model for monetizing music, with nothing more than a shrug of the shoulders.

But surely that can’t be it…. there must be some solution to this deadly economic force right?

Well, yes and no.

The bad news is that the froyo effect cannot be reversed.

Once the secret is out that someone is making money from something…. the unstoppable chain of events that lead to zero longterm profit has already begun…. it’s simply a matter of how long it takes.

Shaking your fist at the sky won’t do anything except make your neighbors uncomfortable.

Change is inevitable. Industries rise and fall, regardless of how sentimental you are about them.

But alas, while the industries may change, there is a way FOR YOU to escape the vampiric froyo effect, and it’s both incredibly simple and incredibly difficult…

Innovation.

You see, this chain of events all starts with ONE GOOD IDEA.

And in the earliest days…. that good idea can be extremely profitable.

But the moment someone makes money from a good idea, the countdown to the inevitable froyo devastation begins.

It’s like that movie “A Quiet Place”….. once you accidentally snap a twig in the forest, ALLLLLLL the monsters start heading your way.

Which means the only way to stay ahead of the inevitable destruction is to continue to innovate.

If you use the period of time before competitors have eaten away your margins to reinvest in your next idea, then you stand a chance of escaping the boom/bust cycle that consumes so many small businesses.

Whilst everyone else is busy chasing what’s already working, you need to be testing ideas in areas where there are little / no competitors.

If you’re able to crack a new idea before your original one is no longer profitable, then congratulations, you’ve just bought yourself some time.

Now you have to do it again.

And again.

And again.

…..

Now… I suspect that this doesn’t make you feel too warm + fuzzy inside.

The paranoia and treadmill-like exhaustion of constant innovation is a brutal force of change in any industry.

It’s the main reason why most people quit…

One they realize that “doing what everyone else is doing” doesn’t make money… they give up.

Even worse… some manage to have their great idea, but get so bogged down in their own success that they fail to innovate and stay ahead of the curve (i.e. the current major record labels).

They start making money and get so enamored with themselves that they don’t see the competitors coming…

(There’s a great Wall-Street-ism for this: “Pigs get fed, hogs get slaughtered.”)

The same principle applies to making music.

If you are a true artist, then innovation isn’t something you fear… it’s something you crave.

Art = innovation. Which is good art gets also gets copied almost immediately.

The “froyo effect” is no different than when Nirvana wore t-shirts and jeans onstage and then suddenly EVERYONE started dressing apathetically in their live shows.

It’s no different than when Ed Sheeran released “Shape of You” and then suddenly every pop track for the next 5 years had some sort of steel-drum sounding 4 chord beat underneath every arrangement.

When something works, people copy it.

And when people copy something, it stops working.

The antidote to the froyo effect is to create fearlessly and to maintain your position at the forefront of change by refusing to get lost in your own successes or chasing what everyone else is doing.

If that sounds difficult, it’s because it is.

But if you’re willing to ride that wave without fear, I assure you it will take you on the adventure of a lifetime.

So now I ask you… what’s a NEW idea that you feel passionate about that everyone else is missing?

Don’t wait for someone else to do it first.

Be the seeker, not the chaser.

🫡⚔️🫡⚔️🫡⚔️🫡⚔️

Michael from mad records