Victus Spiritus


What Middlemen Dream Of

12 Mar 2011

Yesterday I tuned into an AVC riff on music distribution, and caught a glimpse of the dreams of a much younger Mr. Wilson:

When I was a kid, I'd imagine that my entire record collection was a bunch of digital files that I could access from any computer

Fred admits that he didn't see cloud computing and streaming coming, but it's clear that he had an image of how accessible music would be in the future. He never mentioned imagining the power that a Music Industry would wield over distribution. The Industry is the legacy gatekeeper, and few legends could achieve fame without their blessing. Imagine having sports stars without the national leagues. Gatekeepers and supporting middlemen are the incumbent channels of attention, but how much longer will their reign continue with the decline of centralized distribution and control (networks vs Internet).

Who are middlemen?

Below the post line is where much of the magic happens at AVC. There was strong sentiment against middlemen as gatekeepers, as well as the counter opinion that middlemen serve as bridges to greater overall value creation^. As I read those well thought positions, all I wondered is what middlemen dream of in their youth.

I dreamt of traveling to other worlds and shaping reality, yet I have a tough enough time just shaping myself. Many kids dream of being rockstars, firemen, or sports legends. Do children who become middlemen dream of connecting clients and customers? Maybe a few did, but I think the best in the business recognize an opportunity and push like hell to make an abstract idea a reality.

Faceman is a necessary role in any A-Team, and there will be many more connectors and far less gatekeepers as social web distribution channels continue to mature.


^= Baba is opposed to middlemen who provide little value to distribution beyond wrestling with bureaucracy.

When I read about "a lot of hard work went into getting this release approved for US release, and quickly" I am just flummoxed, these folks did not create the content just pushing documents back and forth mulling over who gets what percentage of revenue is not hard work really. Hard work is the creative process of making music etc. Damn gate keepers of the world you don't create anything but decide who gets when and how one gets much of anything.

Andy Swan
* rose to the defense of the middleman.

It's really great that they sent this and you posted it. I think we're all a little too quick to dismiss middlemen simply "because of the internet". This band COULD put all of their files up on their website and just sell them. Everyone knows that. But THEY DON'T.

So there obviously must be some value that the middlemen are providing. I'm sure as fans of music, we all have our bias of how they could be doing it better, just as I'm sure the bands have different biases of how the middlemen could do a better job. I'm sure the middlemen would like to have different hurdles and opportunities as well....and I'm 1000% sure that the best middlemen in the long run will be the ones that disrupt and provide the most value in the chain---human or not.

Charlie Crystle, an entrepreneur and former band member on tour shares his perspective.

Well, they can serve as their own retailer without upsetting the chain, unless it's explicitly prohibited by their contract. The upside of a good deal is the marketing, promotion, market power to get appearances, etc. A showing on Letterman can float a band for a while if they have shows following in the weeks after and decent margin products available. Place a tune on a film or tv show, and again, some significant dollars.

That doesn't happen often for the self-managed, self-produced band. But back in the day, we were only getting a buck or two per record. The argument is that the record company fronts production and living money (if you're lucky). The smart bands would take their advances and build a recording studio, then produce their own record. If it didn't work out, they still had the studio.

Austin Clements brings up the darker side of middlemen, as bottlenecks.

Chances are their contract does prohibit using alternative means of distribution. And for that, and many other reasons, I completely disagree with Andy about the importance of middlemen. Yes, people are signing up for these deals voluntarily but the net value is after all things are considered is probably less than the artist initially perceived. We've all bought a product that doesn't live up to its expectations.

This is clearly the case where the middleman is acting more like a bottleneck than a market maker in this instance. The band signed with the the label to provide support in some areas, but now the label is standing in the way of sales through critical channels.

Middlemen, by their very nature, represent a temporary plug for an inefficiency a the market. Most times they become obsolete when two things happen, 1. They are replaced with technology that does they same job they used to do and 2. Both parties on either side of the middleman have access to the same information that only the middleman once did.

*= Andy writes a mean blog of his own, and his recent post you're already dead is a powerful tool in the hands of a builder. Here's the heart of Andy's sentiment as he describes a friends' business problems:

The slow bleed was on, and it was not only hurting the business, but way worse than that— it was hurting his psyche, motivation and confidence. Negative cash flows on a consistent basis tend to do that to a guy.

My response? ”You’re already dead.” DIE. Absolutely dead. There is no slow bleed anymore. Those future negative cash-flows have already occurred. You’ve hit rock bottom. Now what? What are you going to do?

This is as liberating of a thought as I can give to anyone. You see, once you’re dead….the bullets stop hurting. They become laughable. Your conscious is freed from the barrage of bullets and instead focuses purely on the opportunity ahead. Dead people and dead businesses fear no risk. It does not exist.

my response:

The courageous mind has already died. Yet in the eyes of a dying man, any life is precious.
I'll need a moment to chew on that one Mr. Swan. I've grown far too accustomed to thinking like I'm breathing.