Sales straight from ‘the farm gate’; Some creative industry entrepreneurs are using direct-to-consumer business models

May 29, 2013 3:42 pm

Sales straight from ‘the farm gate’

By Ian Sanders

In a hot and sweaty basement in Brighton, on the English south coast, visitors to The Great Escape music festival are attending a keynote address about how to “do it yourself” in the music industry. “You’ve got to think like a small business because that’s what you are,” singer-songwriter Billy Bragg tells his audience. Mr Bragg, also famous for his political activism and his support for striking coalminers in the 1980s, might seem an unlikely entrepreneurial role model, but he recently started cutting out intermediaries in order to sell his music direct to the consumer. Now in his fourth decade touring and selling records, he has had to reinvent his business model to survive.

Content-creators, from musicians to authors, have the opportunity to sell their work themselves, with fast and effective digital tools for everything from ecommerce to promotion. Mr Bragg’s latest album Tooth&Nail , released in March, was launched in record stores and via Amazon, but he also encouraged fans to buy direct from his website by including a signed print of the album artwork.The artist as entrepreneur holds challenges: Mr Bragg has to juggle not only writing and performing but also running the online shop, organising tours and promotion via social media, wth the help of his partner Juliet Wills, who has decades of music business experience. Mr Bragg is also an established star, with a strong fan base and 161,000 Twitter followers. “Making a living doing what I love is more possible with the internet than it was before – before, you were relying on all those other agencies to get your word out,” he says.

Although Mr Bragg maintains a relationship with an intermediary – in his case, record label Cooking Vinyl – he has still had to fund the album and tour himself. Playing live is his main source of income, so drawing on his previous experiences of touring, he devised a business plan around playing enough solo dates in 2012 to fund a 2013 tour in North America, where he could play bigger, more lucrative shows with a band. “I needed a war chest to do the American tour. If I want to carry on doing this for another 15 years, I have to put my business hat on, and work out how . . . to do it,” he explains. Revenues from selling records and other merchandise direct from his website and at concerts allows him to do so.

Tools to transform the artist into an entrepreneur

Selling “from the farm gate” is made viable by a suite of digital tools that have emerged to help a writer, publisher or musician to become a small business. From raising funds, to setting up shop and shipping orders, here is a selection of online services available:

 Kickstarter and Indiegogoare crowdfunding websites that enable anyone with an idea to secure advance orders – and start-up funding – from customers and backers before the founders launch their project.

● Shipwire is an order fulfilment service that can store physical goods such as books as well as ship them to customers. The company will also manage the supply chain on behalf of other businesses.

● Shopify brings e-commerce functionality to any website by providing everything from shopping-cart software to payment collection.

● CD Baby offers a service whereby musicians upload their music and the site makes it available for direct sale on Amazon, from Facebook pages, on iTunes or as physical CDs.

● Bandcamp allows bands to sell music and merchandise directly to fans. Musicians get their own Bandcamp web page, on which they can sell both digital and physical goods.

It is a model successful authors have also used: playwright and author David Mamet recently announced that his next book would bypass a traditional publisher. Business author Seth Godin has experimented with direct-to-consumer sales using the crowdfunding site Kickstarter to secure commitment on advance ord­ers for The Icarus Deception , his latest book. Mr Godin believes selling direct benefits not just the writer but can also deliver better books faster to consumers by serving micro-markets.

But this model is not restricted to music and books: “At the heart of just about every media business going forward is a direct connection with the audience,” he says. “Intermediaries are slow and expensive and unreliable. Netflix knows who watches. Blockbuster, Universal and J.D. Salinger never did. It’s a huge shift.”

Of course, Messrs Bragg and Mamet already have personal brands on which to build. Is direct selling viable for less-established creatives?

Two niche book publishers are looking at direct-to-consumer sales as a way to make their businesses more sustainable. As well as cutting out intermediaries, The Do Book Company and A Book Apart hope to build their brands among a community of followers who will support them over the longer term through word of mouth marketing. The internet offers start-ups ecommerce software such as Shopify and services such as Shipwire, an order fulfilment service, to bypass stores and distributors.

This new breed of small, agile publisher offers a route to market for niche experts who want to become authors. The Do Book Company was launched in London last month by former Random House executive Miranda West. Although Ms West has a distributor in place so readers can find the books in their local bookshop, she is focusing on selling direct. Her business model is made viable via a partnership with the ideas festival The Do Lectures, which delivers both a bunch of speakers as authors and a ready-made tribe of potential customers who view the lectures online and follow its Twitter feed.

Like Mr Bragg, she aims to add a bit of value when readers buy direct: Alice Holden’sDo Grow – Start with 10 simple vegetables includes a small packet of edible flower seeds.

Mastering the necessary disciplines to disrupt traditional publishing brings its own challenges. “I’ve learnt a huge amount about ecommerce and the systems to use, the infrastructure to build,” says Ms West. “It has been a bit of an eye-opener.”

Across the Atlantic in a Brooklyn co-working space, Mandy Brown leads a publishing company with a niche content proposition of “brief books for people who make websites”. A Book Apart grew out of A List Apart, a mailing list for web designers started by her co-founder Jeffrey Zeldman in 1997. A Book Apart has a loyal and enthusiastic online community, but Ms Brown warns it took 10 years to build. “Communities are not ready-made,” she says.

Cutting out intermediaries means A Book Apart can offer 50/50 profit splits to authors and Ms Brown acknowledges it would have been much harder to pursue her business via a traditional publishing route. “Our profit margins are much higher than if we were going through booksellers and distributors,” she says.

Being marketer, shop and distributor as well as publisher can be tough. “But we kept the business lean and relied on as many other systems as we could for things like fulfilment and order management, and grew slowly and carefully,” she says.

Back in Brighton, Mr Bragg is confident that thinking like a small business is the future. “Selling my own material direct is how we make a living,” he says. “Selling ‘from the farm gate’ is the bit that keeps me alive between records.”

That is what he reminded the audience, as he sang “Start your own revolution and cut out the middleman . . .”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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