Once Again, Give It Away And Pray Isn't A Business Model
from the but-it-doesn't-mean-free-doesn't-work dept
There’s an odd article over at TorrentFreak, which is usually quite good and reliable. This one starts out with a title announcing that Nine Inch Nails’ Donation Model Doesn’t Work for Most Artists. That’s a questionable assertion from the very start, because Trent Reznor and Nine Inch Nails, for the most part, haven’t used a donation model. Instead, Reznor has very much focused on using free as a part of a business model built around giving fans scarcities to buy. Yet, TorrentFreak falsely states that Reznor made $1.6 million using a “donation” model. That’s simply untrue. He made $1.6 million by selling scarce goods.
The rest of the article goes on to show that a bunch of unknown artists on some file sharing service that asks for donations didn’t make very much money doing so. That should bring out a “well, no duh!” from pretty much anyone. As we’ve said for years, “give it away and pray” isn’t a business model at all, but that fact is hardly a condemnation of using free infinite goods as a part of your business model. The unfortunate opinion out there, often repeated by those who want to trash those of us explaining the economics at play, is that we believe if bands just put their music out for free, they’ll make money. Thus any band that doesn’t make money that way is an example that the model we believe in doesn’t work. This argument completely misses the target.
First of all, there will always be some bands that won’t be able to make money — and that’s because they’re not very good. No business model will work if you’re not that good. So, seeing a particular business model not work for some bands is hardly a condemnation of that business model. Second, if bands want to make money these days they need to do a lot more than just give away their music for free. They need to get out there and cultivate true fans, which means working hard to build up a serious fan base. From there, they can begin to put in place any number of business models to make money, focusing on using the free infinite goods (music) to sell scarcities of some sort (concerts, access to the band, special limited edition goods, the creation of new music, etc.). So, the fact that a bunch of bands that used a poorly thought out business model didn’t make money from it isn’t surprising. It’s the way it should be.
Filed Under: business models, donation model, economics, give it away and pray, nine inch nails, trent reznor
Comments on “Once Again, Give It Away And Pray Isn't A Business Model”
My Cut, Your Cut
At least NIN got to keep the bulk of the $1.6M whereas the RIAA got null. Cut out the middle-man!
And where, pray tell, does the startup band get the money from to put together these things?
Re: Re:
Where do they all start? The typical progression used to be;
1) you got a bunch of people together to make music in the garage for fun,
2) then went on to play at a few bars on open mic night,
3) then got the ears of a few bars willing to pay them a small amount to entertain their customers,
4) then more bars/clubs,
5) then the RIAA would pick you up and provide advertisement schemes for you, the money used to be in the concerts not record sales. Record sales were just a measurement of how well your concerts would do.
Now its easier to start on your own, just add one more person to the band that’s not musically inclined, the “geek” to start a web-based viral ad campaign for you. Now its;
step 1
step 2 + start recording singles and possibly video taping it and distributing on Myspace and YouTube.
step 3
step 4 and skip step 5
after step 4 you should be able to start making a little bit of cash off of it, about as much as you would have going the old route. and added bonus, you can gain fans faster with announcing your disdain for the RIAA.
Re: Re: Re:
Except the old route, record labels, funded the tour. Now that they are no longer around, how does a band get funding? Investors? But the music is free so how do the investors know what they will get as a return on their investment? Will they use the number of downloads as a measurement? But they can’t control the downloads. Since it is free, people can spread around copies without going to the band site and downloading it. So what becomes the predictor of success?
Re: Re: Re: Re:
Except the old route, record labels, funded the tour. Now that they are no longer around, how does a band get funding?
Jonathan Coulton has a model where he waits until he gets enough people online to commit to appearing at a show, and then books a show in that location. This way he makes sure that he’ll make enough money from a show.
And, as I’ve said in the past, there is still room for record labels out there, but they shouldn’t be making their money from selling music, but from helping to sell these other scarcities.
Will they use the number of downloads as a measurement? But they can’t control the downloads. Since it is free, people can spread around copies without going to the band site and downloading it. So what becomes the predictor of success?
If a record label is so stupid that it can’t figure out which bands are getting attention and which aren’t, then they don’t deserve to be in business.
Re: Re:
And where, pray tell, does the startup band get the money from to put together these things?
Let me ask you this: in *today’s* model, where does a band get the money to get a deal in the first place? When they start out, they tend not to have anything anyway, so they’re playing in their basement, and recording cheap demos.
That doesn’t change, though today, it’s much cheaper and easier to record a decent demo and then get it online where a much bigger audience can hear it. Then you start playing local shows and building up a following, and then you start putting the rest of the business model in place.
It’s easier today than in the past, so I’m not sure what your complaint is about.
Of the four scarcities listed, one (special limited edition goods) can be pirated if it is digital, thereby making it non-scarce.
I go to an awful lot of concerts myself (thirty in the last year), but most people do not.
“Access to the band” is irrelevant if you have never heard of them. Valuable once we reach the Trent Reznor level, though.
The hostage model is about the only thing that passes the sniff test.
Re: Re:
Of the four scarcities listed, one (special limited edition goods) can be pirated if it is digital, thereby making it non-scarce.
how do you pirate deluxe editions with signed photo-albums of band tours? how do you pirate a old-school record? how do you pirate anything that would come with a limited edition album or other piece except the music? gonna scan a T-shirt and upload it on bit torrent?)
I go to an awful lot of concerts myself (thirty in the last year), but most people do not.
lots of people want to see their favorite band in concert. their favorite band may not be the same as your favorite band, but people will pay to see bands if they are any good. if they aren’t good yet then they get fame buy getting gigs at bars and other places to A:make money and B:get their name out
“Access to the band” is irrelevant
that is like saying “selling music is irrelevant if you have never heard of them. Valuable once we reach the Trent Reznor level, though.” no business model will work if people have never heard of you. If you have enough fans (and you can hit the mark well before the Reznor level) then some will be willing to get to hang with you for half an hour. hell I’m surprised I haven’t been seeing go to lunch/Dinner with _____ being auctioned off on Ebay or something. there are enough people that would be willing to pay just to say they got to sit down and eat with their favorite band after a concert that the bands could make a killing.
Re: Re: Re:
“Of the four scarcities listed, one (special limited edition goods) can be pirated if it is digital, thereby making it non-scarce.”
The collector’s edition of the NIN album did not have any extra music tracks on disc. Period.
The only benefit to buying it was if you were a hardcore NIN fan and wanted the spiffy physical goods that came with it most of which you can’t just “scan in” and distribute online.
“that is like saying “selling music is irrelevant if you have never heard of them. Valuable once we reach the Trent Reznor level, though.” no business model will work if people have never heard of you. If you have enough fans (and you can hit the mark well before the Reznor level) then some will be willing to get to hang with you for half an hour. hell I’m surprised I haven’t been seeing go to lunch/Dinner with _____ being auctioned off on Ebay or something. there are enough people that would be willing to pay just to say they got to sit down and eat with their favorite band after a concert that the bands could make a killing.”
You don’t listen to a lot of music do you? A *lot* of bands get the word out purely by word of mouth and usually they have a fanbase by the time a record label gets to them.
See various punk bands or even Primus for an example.
Re: Re:
Of the four scarcities listed, one (special limited edition goods) can be pirated if it is digital, thereby making it non-scarce.
Um. The *limited edition* part of it means that it’s a physical good — and thus scarce. You can’t “pirate” a signed and numbered version of a NiN special edition.
I go to an awful lot of concerts myself (thirty in the last year), but most people do not.
No one said that everyone has to go to concerts to make the model work. In fact, not very many people do. And, as I thought was made clear in the original post, the idea is to use a variety of business models.
“Access to the band” is irrelevant if you have never heard of them. Valuable once we reach the Trent Reznor level, though.
Well, first of all, EVERYTHING is irrelevant for a band no one has ever heard of, but it doesn’t stop them from starting the process of getting known. And, even for fans of small-time bands, you’d be amazed at how much people value access to the band.
Bias
Normally Ernesto’s blogs are a good read, but looking at this I couldn’t shake the feeling he was attacking the radiohead/renzor approaches for the sake of promoting bittorrent.
The problem with bittorrent ‘all music should be free’ advocates is they over-estimate the promotional effect of free music and under-estimate the time and financial investment to create that promotion. Things like studio rental, equipment hire and sound engineers are high fixed costs that are very difficult to reduce.
Until someone finds a good method of producing good-quality records for low-to-negligible cost, then records are going to have to be paid for in some form or another. The associated costs are simply too high to be covered by t-shirts and touring (in fact touring for most small bands work the other way; its a means of promoting the album not making money).
That isn’t to say that ‘free’ won’t be a part of a clever business model, but that it can’t be the only part.
For the life of me....
…I cannot figure out why so many people argue with you about this, Michael. I point to your articles regularly in my discussions with people about the emerging markets and business models within the music industry, and all of this is just simple, high-school level basic economics.
The music is the marketing for the product. The product is the concert, the t-shirt, the collectors edition album, the poster, and anything else that the band can sell which won’t be digitally infinitely reproducible.
How hard is that?
Re: For the life of me....
“The music is the marketing for the product. The product is the concert, the t-shirt, the collectors edition album, the poster, and anything else that the band can sell which won’t be digitally infinitely reproducible.
How hard is that?”
Simple in theory, incredibly difficult in practise.
And its not just digital goods that can be copied. You might jack up your merch prices to help cover recording costs, but how do you stop that guy selling knock-off tshirts for half the price in the alleyway behind the venue?
Copyright perhaps?
How does a new band convince the venue manager to give them a cut of the door price, when he’s got a dosen other bands queuing up to play the set for free?
Re: Re: For the life of me....
um talent? the reason all the “high costs” exist is simply because of the music industry. They made it so that recording studios could charge an arm and a leg for recording time.
as for costs and objectives of the albums or concerts, at a certain point the goals flip from albums being advertisement for the concerts to the concerts being advertisement for the album. this is the point in which the band can start its own record label and the income from albums sold out does the income from concerts. Starting out albums are sold as advertisement for the bands concerts. They are easily distributable and give a taste of the show you can see. The SHOW is the true scarcity which the album is supposed to get you pumped to see.
Lately the concerts are sub par compared to the albums, such as Evanescence the albums promote music that the singer cannot maintain. Halfway through the show her voice is gravely and hoarse, providing a show that is not as good as the clean crisp tone of the album that instead of doing all in one sitting was done over a month, thus allowing her to have a perfect sound. This type of music promotion is all thanks to the RIAA, where they support bands that cannot live up to the music they try to create. I’m not saying gravely and hoarse music can’t be good. seriously look at Janis Joplin, they don’t get any rougher than that. But it was good, and it was better than the album promoted.
Re: Re: For the life of me....
And its not just digital goods that can be copied. You might jack up your merch prices to help cover recording costs, but how do you stop that guy selling knock-off tshirts for half the price in the alleyway behind the venue?
You don’t think many people are willing to pay more for the *authentic* and legitimate shirt?
How does a new band convince the venue manager to give them a cut of the door price, when he’s got a dosen other bands queuing up to play the set for free?
If you’re good, and bringing your own crowds, it’s not that hard. Early on, sure, you may be playing some no-fee gigs, but if you’re able to build a following, that changes quickly.
Re: Re: Re: For the life of me....
You don’t think many people are willing to pay more for the *authentic* and legitimate shirt?
Not if you jack up its price to cover the recording costs. Some may, but many? Not likely, especially when the knock-off looks exactly like the original. A band T-shirt is not exactly a fashionista item.
Re: Re: Re: For the life of me....
“You don’t think many people are willing to pay more for the *authentic* and legitimate shirt?”
Not necessarily. I’ve bought shirts on the cheap outside venues in the past, and the last music festival I went to had the streets lined with tshirt hawks picking up music fans on their way home.
While the authentic stuff might have more value, people still buy knock-off merch in high numbers. And if your pushing more of your income onto merch and ticket prices theres a fair chance you’d have to charge more for it, even if your selling it in larger volumes.
The point is that some finite goods can’t be controlled any more tightly then infinite ones.
Re: For the life of me....
You’ve never been in a band before, have you? Pretty clear you haven’t.
you're right...they all suck...uh boy.
um…There’s 10000 bands on the site that is referred to in this article.
I think to jump to the assumption that the bands on this site aren’t very good or haven’t marketed themselves well enough to allow the model to work is open to criticism.
Re: you're right...they all suck...uh boy.
I think to jump to the assumption that the bands on this site aren’t very good or haven’t marketed themselves well enough to allow the model to work is open to criticism.
I never said they all weren’t good or haven’t marketed themselves well. I just said that’s an explanation for why many of them might not have build up a large following.
As for the others, the article only discusses how much they made from donations, which we’ve already said is a weak business model. There’s no indication how much the bands made from other compensation systems they had established.
They’ve posted an update now to correct how their ascertion NIN used a pure donation model was inaccurate.
Many people are confused between production models and sales/distribution strategies because both are controlled by the same channels today. Production requires $$ and can be self-financed or supported by investors. Investors can be traditional recording companies or anyone else with cash that likes what you’re doing.
Sales and distribution models are changing because it’s now so easy to distribute digital media using the Internet. I haven’t yet seen the ideal new sales model but I applaud those who are experimenting with new models. The right one is out there somewhere. One thing is certain, hanging on to yesterday’s record/CD sales model is doomed to failure so any investment in doing so is a waste.
Oh – and one more critical point that has already been made – new sales and distribution models won’t turn lousy bands into good ones.
Yeah, but it’s so much harder having to work for money than extorting it from dimwitted lemmings who do whatever the mass media tells them to do – i.e. buy records.
So, how does a band get noticed enough to get people to pay for a concert? How does the band get the money for a giant road show without prior album sales funding said road show? You have heard the saying “It takes money to make money”, so how do they fund the “finite goods” if they have made nothing off the “infinite goods”? I think this is a question your “new business model” does not answer.
Re: Re:
So, how does a band get noticed enough to get people to pay for a concert?
How does a band get noticed by a record label today? You do a cheap recording and put it online. You set up a website and a MySpace page. You connect with fans, you give away your music, and you build up a following.
How does the band get the money for a giant road show without prior album sales funding said road show?
Who said anything about “a giant road show”? Look at what Jonathan Coulton has been able to do by picking and choosing his show locations.
And then there are the models adopted by folks like Maria Schneider, Kristin Hersh, Jill Sobule, Marillion and others where, once they’ve built up a following, they get fans to pay ahead of time, giving special extras to those who do.
You have heard the saying “It takes money to make money”, so how do they fund the “finite goods” if they have made nothing off the “infinite goods”?
The same way that a band today funds cutting a demo or playing local shows — except that today it’s cheaper than ever before.
I think this is a question your “new business model” does not answer.
Then you haven’t been paying attention, because the new models answer it much better than the old ones.
Mike, I have a problem with you refering to music as an “infinite good”. What makes music an infinite good, the fact that it can be legally copied and ILLEGALLY distributed? If that is the case, it is hardly an infinite good because it’s distribution involves a cost, that being the threat of prosecution. If the costs of prosecution are distributed across the entire file sharing community you can determine the average cost for each instance of copyright infringment.
I do not have a problem with artists who give away their content if that is part of their business model. I do have a problem with fans that take it upon themselves to ILLEGALLY distribute the works of artists who chose not to include free music downloads as part of their business model. The artist should be responsible for determining which business model they want to use, not the fans. If the fans don’t want to pay for an artists music they are free to not buy it.
Re: Re:
Anonymous, Litigation doesn’t make an infinite good become finite any more then you could write a law that made the color black the same as the color white.
They are opposite in nature no matter you think they should be, and forcing them otherwise is only going to cause problems.
Re: Re:
Mike, I have a problem with you refering to music as an “infinite good”. What makes music an infinite good, the fact that it can be legally copied and ILLEGALLY distributed?
Infinite or scarce is not a legal distinction. I’m talking about the fundamental quality of the good. The reason to do that, rather than focusing on the legality, is that it means that some bands will figure out how to use the infinite nature to their advantage — and then those that don’t will be left behind.
If the costs of prosecution are distributed across the entire file sharing community you can determine the average cost for each instance of copyright infringment.
Don’t confuse average cost with marginal cost. And don’t confuse legal costs, which have nothing to do with the cost of production, with marginal costs.
The artist should be responsible for determining which business model they want to use, not the fans. If the fans don’t want to pay for an artists music they are free to not buy it.
Well, first, I agree that a band has the right to choose which business model they use, and I do not encourage anyone to download music in an unauthorized manner. I don’t do it, and I certainly don’t suggest anyone else does.
But, you’re wrong that the band gets to “determine” the business model. In the end, the market will determine the business model, and if a band chooses a bad business model they’ll go out of business.
Re: Re:
You, sir, are an idiot.
Music is not an infinite good. Digital files are an infinite good, meaning that it costs close to nothing to make copies. You know, as opposed to a pair of sneakers, a car, any other tangible good.
Furthermore, the artists don’t generally get to choose. The record labels choose the business model and the pricing structure. In fact, there are some very notable and popular artists who have never made one red cent from album sales. The labels got it all. There are other very notable and popular artists who flat tell you to steal the music. They don’t care.
This is not a defense of file-sharing, by the way, before you try and call me a thief. It’s simply a break-down of your straw men…
I wonder just how much you could charge
For “Access to Band” for say THE BOSS? Or THE WHO or ROLLING STONES?
You could put that in an auction and just watch the price go up and up and up and up and up and up…you get my point I’m sure 🙂
These are good suggestions for all in the Music Industry to consider. But bands shouldn’t focus all their energies on profit making. They should also understand that Charitable Works will get them noticed and build their Fan Base as well. Not only that, but surprise concerts in unannounced locations with free entry will grab even more Fans.
The FREE model can work side by side, and probably should to be more effective, with the Profit Making model. But as Mike said, you have to hustle to make things work on this level, and if you are a band just starting out, don’t expect millions on your first try. Just starting out means you get to see mild successes and starving successes, it’s all part of becoming noticed and that part of their existence just won’t change, no matter the Business Model they choose to use.
Make A good product and people will notice you and buy it.
What happened to the old days of a Band trying and trying to make it and then finally becoming huge.
Start up bands need to stop complaining and start doing if they want to make it in the music industry today.
If you are a small band looking for money record companies are not the only option plenty of indie companies now exist and are being funded by artists long established in the industry.
“No business model will work if you’re not that good.”
Disagree.
Britney Spears.
Re: Re:
But Britney is wonderful at her job. Her fans love her music. I don’t care for it, but her fans do. If they didn’t think it was good in some way, even just for the popularity value of knowing the lyrics, they wouldn’t purchase it.
When does business model work for the artist
“No business model will work if you’re not that good.”
If you are good studios are going to pay enough money and there is no need to worry too much. Just make music and chill out! (Part of your money goes to RIAA as protection money)
If you are bad……… then a get a job
If you are mediocre and adamant on making some money then these “business models” work. In addition to creating music musicians have to worry about business models and promotion etc
Totally agree with most of what you said there Mike (except that artists like Britney aren’t any good, but get picked up due to their looks).
Established artists with a big fan base can afford to give things away for free (or donation), and sell exclusive items on the back of that press (like NiN/Radiohead). Good luck to them.
Other artists would do well to give away a few of their album tracks, like they do at sellaband.com, thesixtyone.com and other sites, but not all tracks. If people like the artist enough they should buy the whole album.
It took alot of money to promote/market the Nin’s of this world, which other artists will never get. You can have the greatest song in the world, but if nobody knows about you…
Re: Re:
This is what I mean in this day and age the whole If nobody knows about you your great song will go nowhere is irrelevant learn to use technology or get someone to help you use it and you have a free worldwide audience for your great song and this will lead to future success.
I for one feel and I am thinking I am not alone in this that most people in today’s world are lazy and just want success handed to them those days are long past and you have to be good and try hard to make it in this day and age.