Monday, 24 May 2010

Never Mind The Box Set - Case Studies

Last week I made my ‘return’ to the music business (after a spell contracting in FMCG or ‘real business’ – a contrast to be blogged about in future no doubt) with a keynote at Music Tank’s ‘Never Mind The Box Set’ discussion – the topic being the state of the current ‘physical’ music business. Full details you will find on the superb Music Tank site.

In my talk I presented four brief case studies of physical products that had come ‘back from the brink’ to find cult, niche and perhaps even mainstream, success. These were:

• Moleskin
• Lego
• Filofax
• Marvel

I thought it might useful to post these here as part of a series of posts this week to mark the ‘return’ of the JB blog, as it were. These case studies were the brands that came from top of mind in discussion with Music Tank – so they are not precise analogues for music – but I don’t think it matters for providing us with some imagination, innovation – a bit more belief, perhaps.

These are specific businesses rather than industry formats like the CD, but these brands are in many ways, symbolic of the industries in which they operate.

We’ll also see how these businesses have smartly embraced digital innovation but even more smartly, kept the physical product alive and well – protecting where the real, tactile value is. Real products remain at the core of these businesses.

Case Study 1: Moleskin

How did writing make such a comeback from the brink of extinction? What’s more anachronistic to us now, the notebook or that funny gadget with a dodgy pen all the early adopters were brandishing in the mid 90s? Writing recognition, the touch screen keyboard and voice recognition tools still occasionally ‘threaten’ the business of handwriting, yet it’s hardly enough to get the stationary business quaking.

The origin of Moleskin’s recent success might surprise. The rights to the famous designs were acquired by Italian company Modo & Modo as recently as the mid 90s and the big global marketing push didn’t happen until 2002 – now every second person working in the global creative industries seems to use one.

Success Factors for Moleskin

o Design, design, design – it’s just a notebook! But the look & feel means everything to its dedicated users

o Heritage – the ‘story’ – Hemingway, Bruce Chatwin writing beautiful prose in them – these stories are now part of the folklore of the brand

o Variety – size, colour, features – I’m using the ‘Woodstock’ red one just now

o All this comes with Premium – people pay 6-7 $’s more for a Moleskin versus a standard notepad – it’s all in the branding

The Root of Moleskin’s success though – the Insight if you will – is the art of writing – that’s what people really value. Can we work an equivalent for music with the art of listening?

Finally – Moleskin notebooks are addictive! Could you really switch back to using just a notebook? Can digital be addictive in the way a physical collection is? Can CD packaging be improved enough to raise such questions about digital music?

Case Study 2: Lego

Another business brand literally brought back from the corporate equivalent of life support, Lego was dead as a dodo at the turn of the millennium, with losses spiralling to €242m by 2004.

Fast forward to August 2009 and a buoyant Lego announced a robust increase in turnover and pre-tax profits of €124m for the first six months of 2009, up 61% over the same period of 2008.

Much was attributed to Jørgen Vig Knudstorp, a young dynamic CEO, who according to himself “changed everything but the brand”.

But really the success was down to a combination of licensing (Star Wars, Harry Potter etc.) and product innovation (bricks literally come in all shapes, sizes, colours – enabling you to build anything). Those innovations however came hand-in-hand with brave and painful operational changes.

For the last few years Lego has quietly expanded into video and online games. In 2010, it will roll out Lego Universe, a multiplayer online virtual reality game. It is also investing in real bricks too, with 15 new retail stores due to open before Christmas 2010 to add to its existing 47. Moving direct-to-consumer seems to have worked.

Success Factors for Lego

o Innovation in digital and physical – working symbiosis between these

o Heritage – converting parental approval and children’s creative instincts into sales

o Variety – size, colour, features

o Niche strategy – Lego’s sales are said to be concentrated on a relatively small market of loyal household customers (around just 2 million households according to one report)

As with any turnaround story, there’s always an insight that proves key to the Knudstorp’s own words: "We take the virtues of Lego and the virtues of Star Wars and create something more optimal out of it. A great example is the Lego Star Wars game which has been immensely popular. Here you have a category where many parents perceive it as not really creative and not very good for their children, but when it becomes Lego the parent says 'OK, now I feel comfortable, since it's Lego plus Star Wars.' It has the benefits of both worlds. Two plus two suddenly becomes five."

Case study 3: Filofax

That great symbol of the eighties – one many of us would perhaps rather forget - is back! And if Filofax can forge a comeback, anything can.

With a St Luke’s advertising campaign in 2006 to re-launch the brand – Filofax shifted its marketing to a younger (more colours), more female (more personal) customer base, with modest success. Pre-tax profits almost doubled from £2.8m to £5.5m for the year to January 2009, while sales nudged up to £61.4m from £59.7m a year earlier.

Success Factors for Filofax

o Niche strategy – what had become ‘naff’ is now a mould breaking statement for mavericks

o Heritage – Filofax built on the retro trend – but did so with deeper, practical benefits too

o Innovation: One innovation introduced in the run-up to Christmas 2010 was a service allowing customers to order personalised diaries from the website. Filofax users can now buy a printed calendar that incorporates all the birthdays, anniversaries and important dates they would otherwise have to annotate laboriously every year

Finally, once again here comes the insight – what’s become valuable today versus the 80’s when everything was about making money – is making time. Filofax responded by being less about business diary management and more about general lifestyle management – allowing people to manage all of their available time.


I’ve written extensively about Marvel In editorials and blog posts so I will re-cap very briefly.

Once again Marvel is a riches-to-rags-to-riches story. In 1997, Marvel Entertainment escaped bankruptcy by a thread thinner than one of Spiderman’s. The company had failed to diversify its publishing business and flooded the market with comic book lines, effectively commoditizing its core business and leaving the company with a stock value of under $1.

Yet Marvel was transformed to a business with a market value of $4 billion, the price paid by Disney when it acquired the company in 2009.

Again, format wise, Marvel is becoming a seamless world of the digital and the physical. While digital content thrives (motion comics being a superb, natural innovation), physical product is hardly the Cinderella business, with the Graphic Novel industry in rude health, now threatening to break out of its geeky niche status and into the mainstream. See also the post on Marvel on this blog last year.

Recurring themes

In summary, a number of success factors associated with these case studies recur as learning or inspiration for music in a physical form.

1. Heritage - building on original strengths.

2. Branding - generating attractive stories.

3. Variety - product in all shapes & sizes - even personalised.

4. Insight - building on key actionable insights - eureka moments.

5. Innovation – clever interplay of the digital and physical worlds.

All these products could so easily have died, but belief, smart, brave decisions and real demand – allowed them to survive, re-build and thrive in today’s over-stimulated, ultra-competitive, digital world.

Versions of this post may appear on Music Tank and in MusicAlly's fortnightly circular.


Sheryl Miller said...

Have been missing the JB, so nice that you're back in the groove(!)

The key here seems to be finding the profitable niche, something that the major labels seem to be less keen to invest in outright, unless it falls ito their lap or happens organically over time. Don't they still seem to chase after the manufactured-sounding, throw away, one-hit, straight in at number one, mass-mkt artists?

Keith Jopling said...

Hi Sheryl welcome back! To be fair to the labels, I don't think they do 'chase after' manufactured sounding artists etc. though they do still find the prospect of hits overwhelmingly more tempting than working the niches. There's value in them there niches. Thanks for reading and commenting.