Photo by http://www.flickr.com/photos/mightymightymatze
As the world and his blog is now aware, the latest Nine Inch Nails album has been released over the Internet, in a variety of formats and prices. Rather pointedly, Trent Reznor remarked, “I’m very pleased with the result and the ability to present it directly to you without interference”. However, the most interesting thing about this (press) release is the following quote:
“Now that we’re no longer constrained by a record label, we’ve decided to personally upload Ghosts I, the first of the four volumes, to various torrent sites because we believe BitTorrent is a revolutionary digital distribution method.”
Furthermore, the album is being released under a Creative Commons licence that permits sharing. So, while the music has been made available for purchase both digitally and physically, the band are essentially saying that it is OK to distribute for free. They are not concerned with revenues or royalties on the release.
This leads back to a couple of prescient posts from some very authoritative figures. Firstly, Chris Anderson started the PR campaign for his latest book with a preview in Wired entitled “Free! Why $0.00 Is the Future of Business”. He highlights how Prince was able to release his album for free (or the price of a newspaper, with a free Mail on Sunday bundled in) by making money from live performances. That he could have sold out the dates without the CD is seemingly incidental. I was at one of the O2 gigs and while the performance was fantastic, the CD has had one listen.
The free hypothesis ties in with Seth Godin‘s Seinfeld curve (the second link is a must read):
If you like Jerry Seinfeld you can watch him on television, for free, in any city in the world two or three times a day. Or, you could pay $200 to go see him in Vegas. But there is no $4 option for Jerry Seinfeld. This is death. You can’t make any money in here. Because if you’re not scarce I’m not going to pay for it because I can get if for free. And one of the realities that the music industry is going to have to accept is this curve now exists for you. That for everybody under eighteen years old, it’s either free or it’s something I really want and I’m willing to pay for it. There is nothing in the center-it’s going away really fast.
As Seth points out, digital makes scarcity obsolete. There are no longer finite units – when I lend or share music, I still have my copy. With infinite supply, the price gravitates towards zero.
The traditional business model of the record label is in ruins. Seth suggests that we are moving from brand/artist management to tribal management:
That the next model is to say, what you do for a living is manage a tribe…many tribes…silos of tribes. That your job is to make the people in that tribe delighted to know each other and trust you to go find music for them
I think the Seinfeld curve is genius but, through my interpretation at least, tribal management is flawed. It is saying that niches need to be identified – almost isolated – while an editor of sorts suggest music for the tribe to select. Evidently people can be in multiple tribes, but a tribe – traditionally based on kinship – is the primary social identification. There is a hierarchy. Musical influences don’t conform to this. And if music is free at the point of entry, why should people choose bundles?
Furthermore, musical movements shift faster than general societal trends (where is crunk these days?). Newspaper editors can predict and adapt to shifts, but in this sphere it would be far more difficult. A Nick Denton type mogul could emerge and preside over an ever-shifting portfolio of niche movements. But can this trust last? Gawker hasn’t had the smoothest of rides recently.
I am not nearly as clever or insightful as Seth, and I do not have an alternative answer. What is clear is that the Internet is brilliant for musicians to disseminate their creations virally. More people are listening to more music through more methods than ever before.
And for businesses? In a free economy, one needs a combination of creativity, luck and finance to be heard over the cacophony. And with less control over distribution, it becomes more difficult to judge the success of a release, to measure a return on investment, and to forecast future finances. Dull perhaps, but integral to a healthy business. Guy Hands must be in his worst nightmare. However, this can be where the Seinfeld Curve comes in. The live arena offers a unique, finite experience where supply and price can be controlled. So will CDs become the loss leaders – the razors to the blades?
From a research perspective, the future is fascinating. With no accurate measurements, how can we assess succcess and forecast for the future? As well as music, it raises fascinating questions over the future of TV. I will return to this topic later in the week with a few further thoughts.
sk
Filed under: internet, Marketing, music, Viral campaigns | Tagged: bittorrent, chris anderson, creative commons, emi, free, ghosts I, music, nine inch nails, record labels, seth godin, viral marketing |
Curiously Persistent 
Very interesting Si. But haven’t Radiohead already figured this out? They’re prepared to give the album away for free but are charging £42.50 for fans to see them live. Does the Seinfeld Curve lead to a scenario where the loss leading CDs are paid for by increasingly overpriced live shows? And won’t that simply have the effect of pricing the “real fan” out of the market, a la Premier League?
Thanks for your comment Ben. Obviously Radiohead have the dedicated fan base to be able to charge such an amount. Prince charged less but performed more shows.
I wouldn’t be surprised if we saw Live Nation/Madonna type arrangements on a smaller scale. Promoters sign up bands and distribute music to entice people to the live arena, where the money is made. Smaller bands will charge smaller fees and make less money, at least in the short-term. However, prices can also be subsidised by cross-promotions and sponsorships (look at the amount of partnerships NME is able to announce for its various events).
It is certainly an interesting point about pricing certain fans out once bands reach a certain level of popularity. There are already the equivalent of armchair football fans in music – people that consume a lot of music in their homes/on their mp3 players, but never actually go to events. But this is primarily down to choice, and not cost constraints.
Hmm. My guess is that bands/artists will only make money from recorded music by exploiting their publishing and performance rights to advertisers, broadcasters or other mass commercial syndications (eg the compliation CD format still sells well – for how long I don’t know). For that to happen, they must own the rights to the music in the first place (ie be the songwriter OR be a v good businessperson). NIN may be making a big song and dance with this Creative Commons malarkey but I bet you anything they’re still cashing in their royalty cheques from radio play/car adverts/whatever. This model won’t work for performers who don’t write their own material, so if we want to keep Britney Spears in tracksuits then the industry dudes are going to have to think up something else.
Interesting points Kat – though hasn’t it been the case that even successfuly “manufactured” artists (Steps and S Club 7) were essentially paid a wage, and quite a low one at that. I can see pop starlets-in-the-making agreeing to this in exchange for their 15 minutes.
Moby has a lot to answer for with regard to advertising music, though judging by this, Trent may not need to give T-Mobile et al a call just yet.
Interesting point by Kat about the compilation CD still selling well. Why is this occurring? And whatever happened to the raft of businesses that emerged a few years back offering consumers the ability to choose their own compilations and have them recorded, packaged and sent out to them? Has iTunes cornered the market for DIY compilations?
Personally, I could never see that compilations model working – the joy of the mixtape is the DIY aspect – the sleeve is as much a part of the compilation as the tracks
Ben – choosing your own compilations would miss the point of buying them for a lot of people. I don’t buy compilations because it’s a handy way of getting all the tracks I want (that’s called the Internet), though the NOWs do fill this purpose for a lot of people. I buy compilations because I’m trusting the maker to recommend me new artists based on the ones I already like, e.g. I have no idea who half the guys on I Heart Techno 2007 are, but because the tracks are chosen by Dave Clarke and we have similar tastes in Detroit Bosh, I’m fairly sure it’s worth a punt. Another example is the Rough Trade annual compilations: a wide range of musical genres, but all chosen by trusted people.
Si – the best model here is the Pussycat Dolls. They have no songwriting input and at least three of them have little or no income from mechanicals. They’re paid a daily wage, and they bloody well earn it (six charting singles off one album plus two world tours in two years = some hard graft there). Yet half of them have already sodded off for solo careers or Strictly X Dancing or modelling or some other income source. Pop groups have a limited lifespan. How many non-writer pop groups do you know that have stuck it out for more than 3 or 4 years?
Good points. Makes you wonder why the Delta Goodrems of this world give up the steady wages of daytime TV for 1 or 2 albums in the sun.