In between selling millions of albums and winning Grammy awards, California rap-rock band Linkin Park has attracted a fair number of detractors. But no matter what you think of their music, it's hard to question their business acumen: The band has started its own "think tank," "creative design studio" and venture capital fund called Machine Shop, following other successful artists in building separate companies to weather the industry's disrupted revenue models.
Kiel Berry, the executive vice president of Machine Shop, writes in Harvard Business Review that streaming services are supplanting album sales, but revenue from streaming services is laughable. In order to make a buck, musicians have been launching companies or becoming venture capitalists.
"The most successful artists in this new landscape have begun to look at new business models and new industries to strengthen their existing brands," Berry says. "They're extending their brand into areas like technology, gaming, fashion, and lifestyle content--essentially becoming entertainment platforms."
Machine Shop, which he refers to as an "innovation company," was created in 1999 in Linkin Park drummer Rob Bourdon's living room before their first studio album was released. Before Facebook and Twitter, the group started creating buzz by building online communities and sending their self-produced CDs to early fans.
As the years passed, after releasing seven studio albums, winning two Grammys, and working with Jay-Z and producer Rick Rubin, Machine Shop also found success by offering its marketing services to bands, brands, and TV and film studios. By 2013, as the impact of streaming music services on music sales grew, Machine Shop had to step up its game.
That's when they decided to hire Berry, who worked in finance and marketing. Instead of the typical music management company, Linkin Park wanted to expand its reach beyond music. For assistance they turned to Harvard Business School professor Anita Elberse and her students, who collaborated on a semester-long independent study on "the business of Linkin Park."
"Our goal was to build an internal team of diverse talent to support the non-traditional endeavors the band plans to pursue in the coming years," says Mike Shinoda, Linkin Park's co-lead vocalist. Through the class, the band hit upon a plan to build "a multi-pronged innovation model based on four verticals: video content, global brand partnerships, merchandise, and venture capital," Berry writes.
The guiding principles from Harvard are to build a brand ecosystem people want to buy into; make creative content to communicate Linkin Park's point of view; make sure every vertical reflects the brand's ethos; diversify revenue streams to mitigate risk; and partner with community influencers from around the world.
With a new structure for Machine Shop, Berry writes, "our business now operates like a tech startup, with less hierarchy and far more agility."
After completing the class in May of this year, Linkin Park launched Machine Shop Ventures, a bona fide venture capital firm that invests in consumer-facing companies that "align with the band's ethos of connecting people and innovation through tech and design." The firm has invested in companies including Lyft, Shyp, Robinhood, and Blue Bottle Coffee.
They will still make music and go on tour, but Linkin Park just wanted in on the startup and VC scenes.
"To be clear, we are still in the music business, but creating and selling music now plays more of a supporting role in our overall business mix. As we get ready to headline a five-city stadium tour of China this summer, we are also planning to meet with technology companies, consumer brands, and venture capital firms to discuss opportunities for partnership," Berry says. "Of course we'll play the shows and meet with fans, as we've always done. But along with continuing to make great music, today's Linkin Park is now better positioned to operate in the ever-evolving cultural and business landscape."