Nine Inch Nails and Radiohead

Currently artists on RIAA-affiliated labels get 13% for album sales. The push is for that to decrease to 9% (with Apple pushing for just 4%). I’m no expert; read about it here. So what else is available to artists, and how are consumers responding?

Bands interested in self-determined distribution, keeping 75% of the take, can make such arrangements via INDISTR. CD Baby is another sans-label option that works sort of like Cafe Pressjust-in-time production.

As we all know, Radiohead‘s In Rainbows took the initative to set up a name-your-price roll out, and people are paying way more than they have to for the thing, due to shame or guilt or a feeling of social responsibility or a feeling of connection to the artist. The economics are fascinating. Nine Inch NailsGhosts I-IV is available free on BitTorrent or for five dollars on Amazon mp3. Hard copies of each are fancy and expensive, for the hard core fans. This combo of digital and box set has been wildly lucrative for these wildly popular bands. Both bands are rocking Amazon’s mp3 sales chart and last.fm’s charts.

CASH Music looks to be a promising way to follow in Radiohead’s footsteps by letting fans choose a price. Or bands can use a site like Amie Street that charges according to the popularity of a track.

There are ways to make money that do not involve actually selling music. Free music can work using the right promotional/business model, keeping in mind people who download songs do not necessarily represent a lost sale; they probably wouldn’t have bought the song if that were their only choice and might spend money on the band in some other way or at least influence its popularity. Other ways of making money: concert tickets, merchandise, asking for donations, and now investing directly in a band so they can circumvent record companies. Read this great article about direct band investment companies SellaBand and slicethepie. Also, indie labels and some bands are using RCRD LBL, article here, which hosts free mp3 downloads and pays the band from advertising revenue from the site’s very savvy sponsors. Way cool.

However, the underlying assumption of all of these models and alt-distro-options is that people have piles of disposable income and leisure time. In the first world, bands can get people to pay a price commensurate to their level of established popularity. But what about consumers in burgeoning markets, such as China, et al., who 1) have more depressed economies and less disposable income and 2) no market value, real or remembered, for music entrenched in the culture. Tunes (and other media) are free or sold for a pittance; there’s no good old days of $16 discs to refer back to as a benchmark. So cutting lose the value of songs to the market’s whimsy won’t work the same there.

For instance, “The labels say that piracy has made the effort [of releasing records in China] futile. The International Federation of the Phonographic Industry, a trade group, estimates that 85 percent of the CDs sold in China are counterfeit. Leong Mayseey, the federation’s regional director for Asia, says the piracy rate for downloaded songs is close to 100 percent.”

I think the answer in burgeoning markets such as China is probably going to be something akin to RCRD LBL’s model; tunes will probably have to be paid for by advertising, not sales. I base this on the way that bands are making money touring in China. Ticket prices are lower there, necessarily, based on income, and so shows’ revenues are supplemented with sponsorship deals. Also, the culture is geared differently, not to the cult of personality for frontmen/bands but to the cult of the brand, according to this NYTimes article: “Here there are virtually no artists who have more credibility than the brands. Coke is a lot cooler brand than any young musician today in China.”

So, really, what will work in China? What else can the music industry use as a benchmark to model solutions domestically and abroad? Will some B-school student quit messing around with his or her PowerPoint presentation and try to glean some lessons for us from some other industry breaking into the Chinese market, like tennis shoes? Yao Ming might have some ideas … great article here.

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