Radiohead's widely heralded experiment with free downloads plus a premium package and request for donations (effectively) remains shrouded in mystery, but Trent Reznor and Saul Williams released some numbers this week about a similar experiment. Those numbers indicate that very few people want to pay for recorded music these days.
In the old days, a musician would go on tour to promote a new album. The new model emerging is more likely to take the form of albums being released, for free, to promote higher-priced tickets for live performances and other forms of monetization. Bring 'em in with the artificially cheap stuff (downloads) and cash in on the goods priced at a premium. Downloads as loss leader.
That photo above, for example, is of Chris Messina holding up the In Rainbows "diskbox" he paid $80 for.
As Rex Dixon, the hardest working man in the web 2.0 business and a former touring musician, told me today - that's always been the way it is for most musicians. Playing gigs and selling shirts, that's where the money is if you're willing to pound the payment pavement (typo - lol).
Reznor, of Nine Inch Nails fame, was the producer for the new Saul Williams album. The two made the album available for download, asking that people pay $5 voluntarily for an otherwise free lower-quality copy or buy a higher quality copy for $5.
Here's how the numbers broke down, according to a post on Reznor's blog:
As of 1/2/08,
154,449 people chose to download Saul's new record.
28,322 of those people chose to pay $5 for it, meaning:
18.3% chose to pay.
Reznor says this shows that very few fans are willing to "do the right thing," which is ironic given that the artist in question, Saul Williams, sings all about "doing the right thing" in his music. His music is also rather annoying, in my opinion, and this might have skewed the validity of the science here. (I'm joking, mostly.)
It is possible, though, that contemporary standards of what constitutes fairness in music consumption have simply changed. While today the news broke that the last of the four major US record lables, Sony BMG, has announced it will offer DRM-free music - that may not be a shift as far as the market would like things to shift.
Given the huge numbers of music downloads that are free and illicit, the market seems to be voting for free music. That despite the risk of being sued, even.
How are concert ticket sales, merchandise sales and other forms of monetization going? That's what I'd like to know.
Times are changing and if you can, it's better to work on innovating along with them than it is to make dragging your feet and suing people your business model. Stop your crying, Trent Reznor.
How does the rest of the record industry feel about these issues? I found one person close to the business who preferred to remain unnamed but who had some interesting thoughts on the subject.
Value is ascribed to things that people covet- at one point people coveted what they downloaded. They still do to some extent (ie, dimeadozen and the bootleg market, which is a nice self regulating distribution system) but with rapid adoption of one behavior, the commodity behind it shifts and goes toward ubiquity, ie free. You just have to shift what people will covet. It's the same way with books, newspapers, TV, movies, memory, CPU, etc - every free market system follows this path. Intellectual capital complicates it but can also provide more impetus to be innovative.
These are interesting times!
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It's not music that's dead but the album. iTunes works because people can pay $1 for a song...$1 isn't real money and a song is otherwise free so it works out.
However, when you start talking about $5 or $10 for an album, choices have to be made...a Venti Latte tomorrow or the new Saul Williams? Why compromise when you can have them both?
Posted by: Malcolm Lloyd | January 4, 2008 2:06 PMMarshall,
Well do a bit of quick math. Based on the given numbers Saul made around $140,000 from the people who did pay for the album.
To make that much from a traditional album he would likely have had to sell between 70,000 and 140,000 CDs. This is assuming his cut in a traditional record deal was as high as $1-2 per cd which is actually probably on the high end for many major labels. It also doesn't factor in the funny accounting and likely assumes he also gets the song publishing fees. With many cds for sale at $10-12 from major retailers and thus the label's take lower this is probably a generous assumption.
Given that last year an album TOPPED the Billboard charts for first week sales of less than 100k (I think it was 60k but don't have the details in front of me) and though I haven't heard Saul before I also haven't heard of him before so I don't think he is currently a major act.
My point is that he probably made more via electronic sales than he likely would have from retail sales. And he was exposed to another 125k people to boot. Now if Trent is comparing with the gross income for an album to the label the picture is a bit different but not all that much.
I also think that people are not maximizing the value of digital by focusing on relatively short term offers ( see Radiohead here) instead I think long term ongoing efforts more like Amie Street which offer incentives to some to do music discovery (act fast enough and some things are free or nearly so) but also helps identify really good stuff which is often back catalog and for sale at very real prices (0.98/track at the max)
Shannon
Posted by: Shannon Clark | January 4, 2008 2:07 PMI like "pound the payment" - better than "pavement". Musicians can still make money, but you need a bit of business sense (common sense) in order to do so. Touring, merchandise sales all lead to sales of your music. There are tons of indy bands that do it the DIY way. Tour, sell shirts/merch, and that in turn sells their independent CD.
The actual cost of manufacturing a CD is very little still, and the profit margin is sky high. Why do you think there are record companies? :) Or why do you think the record companies were in such a big business.
There is a lot to be said about Madonna signing with a company known for touring vs another record company.
Rex
Posted by: Rex Dixon | January 4, 2008 2:25 PMIf music distribution switched to the model of making money from gigs + merchandise only then I don't think they'd make much from me! I very rarely go to gigs so the music industry makes far more from me via the purchases I make through music distros like iTunes, Amie Street, eMusic etc. If it was down to tickets sales + merchandise income they'd make much less. I'm sure I'm not the only person like this, I love music but rarely gets out to actual gigs.
I'm not against free music however, I have to admit I did download 'In Rainbows' and paid nothing for it, although mainly that was due to the system Radiohead used to sell the album wouldn't work for me, I tried for several days and then jokingly tried putting 0 for the price and it went through!
Posted by: Rick Curran | January 4, 2008 2:55 PMOne point to consider is that Reznor has reason to be upset about those numbers. Here's why. If Saul doesn't make any money on the album he'll be fine because he'll make money on the road with tickets and merchandise. But Trent Reznor will essentially get nothing for all of his production work.
If artists can't pay producers for helping them making albums then the art form of album production could die off.
Posted by: Adam | January 4, 2008 3:21 PMI wonder... did either Radiohead or Reznor's systems allow fans to download the music for free but then pay for it later...?
I suppose technically that would be possible by downloading for free, and then downloading a second time but paying that time.
But I'm thinking music is just like software now. Nobody wanted to pay for that either - and often they don't.
Shareware-like music would be interesting - free download, perhaps in return for your email address, and you'll get a gentle nag after a couple of weeks asking if you liked it, and whether you wanted to kindly pay a few bucks for it (or buy some other merchandise).
Posted by: Paul Lomax | January 4, 2008 4:39 PM> Reznor says this shows that very few fans are willing to "do the right thing,"
It seems to me he doesn't know that at all--maybe the "fans" were the people who paid for the music and the rest were people who just wanted to sample it since it was free. It would seem he's not factoring in the fact that 155,000 people wouldn't have heard the album normally.
--Phil.
Posted by: Phil | January 4, 2008 6:37 PMgavinwalsh@ireland.com
Posted by: gavinwalsh@ireland.com | January 4, 2008 8:19 PMRight you are Adam. Not only that, try splitting that money among 3 or 4 other band members. It doesn't go very far. Not that I'm in complete support of DRM, but I think consumers have been way off base on this. Since when is it our right to get something for nothing?! I don't think this is good for the industry, but it's obviously where it's headed, making the entry barrier much tougher for new artists. Hopefully the byproduct is far fewer mediocre artists (sorry Britney), and better quality of music from truly great artists who capture a wide audience.
Posted by: chris | January 4, 2008 9:17 PM18.3% chose to pay? it's not really that surprising!
Nhick
Posted by: ITrush | January 4, 2008 10:26 PMhttp://www.itrush.com
Who is this Saul guy? I never heard of him. I don't think you can compare him to Radiohead. They're not in the same league.
When you offer the album for free then you're going to have some taste testers who wouldn't have bought the album anyway (non-fans) and some of those who decide they like the album and buy it who wouldn't have bought it otherwise (converts).
1. Compared to normal royalties, Radiohead came out ahead even at $1-$2 per album download. 2. Radiohead is now selling the album again in physical form and it's doing quite well. This model definitely works but maybe only for bands with Radiohead status or bands that have a truly great album. Again, who is Saul Williams?
Posted by: Mathew | January 4, 2008 11:05 PM"Those numbers indicate that very few people want to pay for recorded music these days."
I think it more points that too many people are willing to steal as more and more people somehow think it's acceptable. It's not.
The people obviously still value the music, because they don't do the adult thing and ignore an album, for example, if they disagree with the DRM or with the pricing. For some reason, they just absolutely have to have it, but feel entitled to it for nothing. The idea that they don't covet the music is just wrong.
This whole thing is getting so old. The marginal cost trending toward zero does not entitle theft. If the price or terms are unacceptable, the option of the consumer is to NOT BUY IT. And if people truly did not covet any particular music, that's exactly what they would do.
I am not entitled to redistribute this website, for example, in a more convenient format, without all the ads and widgets and garbage, even though it's all just bits and costs nothing to copy. Or can I?
Especially with an overloaded site like TechCrunch, there could be a decent market for the same writing that actually loads in seconds and not minutes. If it can be copied, the creator should just call its creation a loss leader, and the consumer should go ahead and unilaterally make that decision for them and tell them to find another business. Perfect.
What these people are saying essentially, is that they will not allow other business models than those they approve of, and they'll still from those they disapprove of. There is no room for a non-touring, non-merchandising artist that wants to sell say 100 albums for $1000 each, along with the exclusivity of being the only people to hear it. Not that I'd buy it, but somehow people think that a model like that should not be allowed to exist, simply because they want everything they want, at the price (0) that they want it for, and then they want to justify the unjustifiable.
There are a million different potential models for a million potential artists and billions of consumers, and the consumer should be deciding these things by what they buy, and more importantly, what they DON'T buy.
Posted by: Morgan | January 4, 2008 11:45 PMAs of 1/2/08,
154,449 people chose to download Saul's new record.
28,322 of those people chose to pay $5 for it, meaning:
18.3% chose to pay.
Reznor says this shows that very few fans are willing to "do the right thing,"
Unwarranted conclusion. He has no way of knowing how many of the 80%+ free downloaders were fans. In one sense, he had a 'radio' listening audience of 180,000 people, 18% of which were converted into paying cutomers. Fantastic conversion rate. I had never heard Radiohead's music, but read articles about their 'name your own price' download. So I downloaded it for free to see what their music is like. Not what I like. Glad I didn't pay for it. But I did send them an email thanking them for trying something new and for letting me hear a bit of their music. Gotta be a lot of casual listeners in Reznor's downloaders. Rather than thinking of them as lost sales, he should think of them as potential customers who have now been exposed to his music.
Posted by: ts | January 5, 2008 5:07 AMIf Reznor can't produce an album for digital release for under $140K then he'd better go find better artists!
And next time maybe he'll get better advice to make sure that the quality of the 'free' version doesn't reduce the 'encouragement' to pay for the lossless edition.
When does the mail-order souvenir CD (with a few bits of exclusive content) get released anyhow?
Posted by: ceedee | January 5, 2008 5:50 AMMarshall,
It's fascinating to see why it's take the music industry so long to embrace the idea that the real money is not selling digital music. When you have people more than happy to pay $300 to see The Police, something is up. The problem is the music labels don't have much of a presence in the concert industry so they don't see much benefit from successful tours, other than ancillary CD and digital music sales. So, what happen in 2008 is Warner Brothers, et al get into the business through start-ups or acquisitions.
Posted by: Mark Evans | January 5, 2008 6:22 AMVHS video tape and audio cassettes have been used to pirate content for decades. Back then, it took one actual buyer to get the content and then copies were available for the price of the blank media (in fact, clever individuals probably made original copies without buying AT ALL).
Fans have been done the "wrong thing" (per Reznor) for a long, long time. The distribtion and playback media have changed, human nature has not. However, people are generally much, much more aware of the business and technology sections of the entertainment industry than ever before and many generally frown upon the profits made by the marketers and distributors.
I do have sympathy for the artist who is shortchanged when their content is pirated, but it's an unfortunate fact of life. "Free" as a business model has really existed a lot longer than people would like to admit. As for Reznor and Williams, maybe they should count their blessings that anyone paid at all.
One other thing that should be considered in today's environment: the ability to produce content is much easier, cheaper, and faster than it ever used to be. Would any current band ever be able to pull a Def Leppard and let SEVEN years pass between albums while staying popular? Unlikely, because now you have dozens of bands who can produce content at 75% of the same quality (or better) and it's easy to get the content.
I use Def Leppard as an example: you can quibble over the quality and type of music they made, but in the 1980's and 1990's they sold one HELL of a lot of records while only releasing three albums in a 14 year period.
Someone else in this comment section made an excellent point about Radiohead's success with the "Rainbows" album - the band had terrific name recognition and reputation, plus a clever marketing campaign, to support them. People were probably paying Radiohead for the download more so because it was RADIOHEAD and not because the album was good. A new or obscure artist just won't command that kind of respect or loyalty.
Good article!
Posted by: Mark Dykeman | January 5, 2008 9:42 AMSaul Williams has been around for awhile now. He's more famous as a poet, but he turned his attention to music and now speaks/sings his poetry. It would be difficult for a record label to market his work or get his songs to mainstream radio.
That's why having Trent Reznor attached to the project is a big deal. Coming off the viral marketing success of NIN's Year Zero, Reznor brings his fan base and popularity to a relatively unknown artist. Naturally, because of his association, you're going to get a small amount of people that are going to investigate Saul Williams even though many have never heard of him before.
I'm guessing that the 18% that did pay for the download represent the individuals who are fans of Saul Williams and were excited/interested enough to make the purchase.
My question is what is the breakdown of profits for the $5 download? Radiohead didn't use a label to release the download, it was when they started pursuing releasing the physical retail CD/boxset that they partnered with multiple labels (for different parts of the world). Wouldn't they stand to receive nearly 100% of those initial download payments?
Releasing those numbers would have a significant impact on other artists (big or small) that are contemplating this kind of release.
Posted by: Brant | January 5, 2008 10:22 AMFree music downloads are a big money losers!!!
A right strategy would be to discount the otherwise expensive CDs.
Posted by: listen_to_rw_web | January 5, 2008 2:48 PMSorry Marshall, I don't agree. I used to work for Sony Music by the way but don't support their ripping off of customers.
- I don't think people should be given the choice to pay. You don't have that choice with DVD's or lattes either. So 'pay damn it' :)
- That said if I remember rightly a cd costs about 50 dollar cent to produce and distribute (yeah!). I was real mad when iTunes started charging 99cents a tune for DRM-ed tracks. IMHO I think up to 70cents a track for DRM free is reasonable (I'm a nobody, in a market sense. I can say anything... it won't happen anyway). Free is a disrespectful price.
- A few things need to happen. Make buying music fun, dvd sales are strong... so whats the problem. Fun is the problem. When you buy music you can't be sure you can play it every where. DVD's don't really have that problem. They are in businessto sell. They are annoying the artists and the customers. Madonna, Paul McCartney, Radiohead, Oasis, Jamiroquai ... all going it alone.
Solution is easy: The music industry needs to 'shut up and sell'.
Posted by: Don Crowley | January 5, 2008 3:04 PMThere definitely is a move afoot towards increased concert attendance as opposed to paying for recordings. It is connected to some macro trends in social networking and our societal structure as it is being impacted by internet technology. Looks for this to intensify in the near future as people change the way they approach the web.
Posted by: Internet Marketing | January 5, 2008 11:34 PMThe 18.3% stat is pointless.
A comparison between his previous amlbum's sale in the same time period would have been much more useful.
I downloaded the Radiohead CD to check them out, had heard of them but not a big fan of indy or rock... Didn't like the CD, didn't pay for it... would never have bought it...
Posted by: yann | January 6, 2008 12:10 PMChris - I think you've got the wrong end of the stick if you think this means less Britney and more Kinski (to pick a really good live act). Look at ticket sales over the last 20 years and it is evident that 'pop' (for want of a better word) has always commanded huge audiences/high ticket prices, while 'quality' artists often struggle to reach beyond cult status.
There is a fiction that the majors somehow want to ram bad pop music down peoples throats, rather than that like McDonalds they are giving people something they want. The majors are just as happy if we buy REM, U2, Radiohead, Flaming Lips, et al, because it's all cash to them.
In fact, if you move the money from song-writing to performance, you're actually more likely to find artists being promoted on their looks / dance routines - remember, for an act like Britney, song-writing is often a cost as much as recording (although mitigated by the fact that professional songwriters often give partial royalty credits to artists in return for the knowledge they'll get more income getting their song recorded by X than maintaining 100% ownership but it not being recorded at all).
The other problem with depending on merchandising / live concert sales is that even with higher gig attendance, it is a massively smaller market. Most people stop wearing band T-shirts a long time before they stop buying music. Ditto gigs.
Not forgetting the significant amount of music that isn't toured (either because it was produced in a bedroom by one person using a laptop, or because hiring a string quartet for a recording session is one thing compared to hiring a string quartet for a tour).
Posted by: JulesLt | January 7, 2008 4:34 AMA few points:
1) The percentage measure is useless. The total number of people who download an album is a meaningless number to gauge fandom. As other people have mentioned, only by comparing the number of purchases (and the profit made) with the number (and profit) of doing it via normal CD distribution can you really know whether more or fewer people have paid for it or whether you've lost money. The closest you can realistically get to this is to compare with previous releases by the same artist.
2) The idea that new artists are finding it increasingly difficult to get exposure is laughable. There are literally millions of bands around at the moment (more than at any time i can remember) making their music available to people via gigs and via the internet. There are endless websites dedicated to ever-more specialist musics that can help create a community and an awareness of these bands. There are also hundreds of independent record labels releasing singles, albums, split 7"s, downloads etc and new ones appearing all the time. Just because the big 5 can't turn a profit does not mean that music is in trouble. As far as i can see, music is flourishing! In fact, one very nice statistic to back this up is that vinyl sales are increasing! Imagine that!?!
3) Bands big or small can benefit from releasing music direct to their fans. I paid for In Rainbows cause I'm a big Radiohead fan. I think smaller bands, however, actually benefit most from this. If a relatively unknown band release a 6-track EP for 2 or 3 dollars and allow people to listen via their site (myspace or whatever) I think a lot of people who like that will pay because they know all the money is going direct to the artist. I always try and buy music direct whereever possible.
Posted by: Wobble | January 7, 2008 4:40 AM