Radiohead’s pay-what-you-like release of their album, In Rainbows, was a turning point in the way record labels and artists work and it will be remembered forever as a crucial move in the changes taking place in the music industry.
Radiohead’s goal was to get the music into as many hands as possible - and by giving it away at any price - they achieved that without the help of a major record label. Although they had an incredibly large following because of their work in the years prior to this recent launch, the lesson here is important: it is no longer about how much people should pay for your music; it is about getting your music into the hands of as many people as possible.
Today’s music industry is about the artist taking control. When you work with a label, your team works hard to get you, the artist, out there rather than the label. So, in the end, all that the fans remember is the artist and not the label. As a result, the fans buy into the artist - not the label. The major acts are going independent because they can do it themselves and they don’t need the control taken away from them by the labels.
That brings in Live Nation - the company which mainly works as a concert promoter but primarily “signs up” artists and offer them a good deal for their concert works. It also doesn’t take away control as U2 and Madonna get to keep their copyrights. The performance business is thriving, and Live Nation have taken a great lead on how it works.
In an article presented in CNN Money Michael Rampino, CEO of Live Nation says, “We already operate your tours. Why not let us make your albums, sell your merchandise, run your website, and produce your videos and a range of other products you haven’t yet thought of? This is the age of the empowering Internet, after all. Artists are in charge. Who needs a record label?”
So now that music is probably free and the goal is simply to get as many people to hear it as possible, one needs to come up with innovative ways of bringing in revenue. Music is just a way to draw in people - how will you capitalize on making it a profitable venture?
What will you sell in a package along with your music, download or tracks to entice people to spend money on the music? A t-shirt? A code to guarantee future downloads free? Free gig tickets? Or simply just free music giveaways and sell-out tours like Radiohead have done?
Words of advice: Don’t throw your time and money away promoting your music if you haven’t yet come up with innovative revenue streams for your work. We are entering a new era in the music industry and must ensure we transition with it. Sit down by yourself or with your team and brainstorm models you can use to sell your music profitably. Mark these words: sell the sizzle, not the steak.
Your thoughts?
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My question regarding this new “360″ model is: Why trade one form of sharecropping for another? If in the past most complaints were that artists didn’t get properly paid on royalties for albums sold or licensed music, and now everyone can see that the retail music channel is imploding, why is it a surprise that now “the industry” is suggesting that artists should own their (depreciating) recordings? It’s reminiscent of the old saw — if a venue wants to pay you a flat guarantee, it means they think they can pack the place, if they want to pay you a door-based agreement, it means they think no one will show up but they’ll be able to sell drinks by waiving cover charges.
It’s not that hard to hire people to hawk shirts, produce videos, or book tours if you have a decent product. Giving all that away to a company like LiveNation might make sense for big-name, established acts, for whom the logistics required might justify giving away a large percentage of the revenue (and for whom record sales will still be a significant portion of the take); for emerging and mid-level acts, who have a lot of upside potential revenue in merch and licensing, it’s a big scam.
The reason “industry” conglomerates are now aiming at merch and ticket revenue, rather than retail music sales, is that’s where the money has always been, and they know it. So the trend now is more exploitative than ever, where artists get to “keep” their recorded music (which has always been the biggest investment and slowest payout for any band) in return for giving away the prime portion of their intellectual property portfolio, live performances and merch.
I think this is just another way of taking advantage of the musicians who are too lazy or too dim to get a handle on the details of the music business, and any bands this side of Madonna or Radiohead who agree to something like this are ensuring that they will never see the majority of the revenue they generate — and they will deserve to be exploited becaue they are stupid.
Hey Kavit
I just published a post on variable pricing for digital music which I’ve been working on for a few days. I happened to see this post of yours in my Reader this morning and incorporated a quote from it because it seemed to fit, although the focus of both our posts is a little different. I touch on the fact that if musicians are essentially going to be using music as a loss leader, there still has to be other products that they hope to ‘upsell’ to their audience. I’m looking for some concrete ideas as to what these could realistically be?
Not only that, but while I agree that it’s important for indies to get their music to as many folks as possible - it seems that the cost of the music to the consumer is not necessarily the barrier to doing this. Indies have a hard time reaching a critical mass of people even with free music, so is it really viable for them to have to rely on reaching a huge volume with free or cheap music in the hope of upselling on some other product?
You can read my entire post here:
http://elemental-consulting.com/blog/will-variable-pricing-ruin-the-music-industry/
I would definitely be interested in your thoughts.
Cheers
Lucy
Hi Kavit,
Thanks for the article. I’m sorry, but I must disagree that Radiohead’s approach (actually pioneered by Jane Siberry, aka Issa) is meaningful for the average indie artist. They had a huge following, and they did a wonderful PR job on their “novel” sales approach. The concept of “get your music into the most hands possible” is not applicable to artists without a million or more fans, especially now that the signal-to-noise ratio is so low (meaning there are so many songs out there competing over the Internet for our ears). I think it’s a danger we can fall prey to — thinking we need to give away our hard-written and -produced music just because the major labels disseminate their music so pervasively. However, live performance, I agree, is key. Also, I’d really like to hear tips from you on licensing deals — I know some success stories there and I think that’s a more viable revenue stream than just pure consumer.
As for Radiohead, the bigger lesson we can all learn is finding a unique PR angle to go with your release. I wonder what they’ll come up with next time.
–Alexa
Steve,
You make a valid point in that there seems no change in the motive of the big corps buying out rights to merchandise and gigging. I am personally against the 360 model as a way of taking advantage, but I do believe however that gigging and merchandise is a good way of making more money for your music business alongside or as an upsell to your music.
Do you gig? If so, do you take up only gigs that’ll pay you for the gig and not for a sharing opportunity based on how many people you bring? I believe those are nonsense opportunities and musicians shouldn’t go for them if they can bring in full-paid gigs. I do sympathize a little bit with those who do these types of gigs primarily as a way to get more exposure, it can work if you plan it well.
It is all about the product - if it is good, and you have complete belief in yourself and your art, it isn’t difficult to source a team and create a winning and profitable business. You mention that it’s a scam for small and mid-level artists to give away rights to gigs and merchandise… what about if there was a company catering to these levels, like LiveNation, but a much smaller scale operation? Would it work? What are your thoughts?
Kavit
Alexa,
It’s cool to disagree - I was merely pointing out a possibility in how music could work for the independent artist. I believe their success is primarily attributed to the fact that they had a massive following before they commenced this project and were guaranteed a good return, regardless.
A lot of advice is given these days to offer downloads and other freebies to people who sign up to your mailing list, but I feel that its now done so much that its not novel or unique. There needs to be a new way of being different that will take you from small indie artist to big known artist.
I’ll share about licensing deals and what I believe in a future blog post, it warrants its own space. What specifically would you like to know?
Kavit
The face of the music industry is changeing and has changed for better words… I know alot of musicians don’t like to hear that but you need to roll with the changes and most importantly find meaning in your songs.
A successful artist today has to learn to offer benefits with their music. Dig deep down inside & talk to your fans, let them know where your songs come from. Tell them why you wrote the lyrics… Communicate and they will love you for it and buy your music. Put the “U” back in your music and you will have no problem gaining new fans and friends sharing your music with others.
I have a song called Down The Road and not only does it have the catchy hook and melody to sing along with I took it one step further and have explained why I wrote the song and about who it was for (the men and women who help the world move along day to day and the families who await their safe return) It truly has become a anthem among truckers and their families all by offering the song free. And in turn I have sold hundreds of my other CDs because of it.
Just some words to chew on. Thanks Kavit!
Peace, Rob Anthony
Steve and Lucy’s comments seem wise to me. To answer your question, Kavit, I do gig a lot as a bandleader and singer with other bands. I only lose money on “investment” gigs where, say, I am paying for additional sidemen/women and marketing/PR because it’s a prominent venue. Certainly, as your fan base grows, you have to aim for more than just a flat guarantee. Then you go for the jugular: a percentage of the bar.
Selling CDs at gigs is a major source of income. I have yet to do other merch, even though I have an awesome T-shirt design, but it’s been on my to-do list forever. CDs are a classic impulse buy, if you know how to sell them from stage. Not that I’m an expert — sometimes I don’t sell a single one — but it’s a skill you must acquire. Steve’s observation that gigs have always been where the money is makes sense based on my experience — I make a lot more from gigs than from international distribution of my latest record through KOCH.
Hi everyone,
Great conversation here. Sounds a bit like the eternal price and quantity/volume debate. After reading Lucy’s article (http://elemental-consulting.com/blog/will-variable-pricing-ruin-the-music-industry/ ) and all of what has been said above, one question that comes to mind is the same one humans have pondered for ages: Does size matter? Size of your fanbase, of course.
Let’s take two top-tier business schools. I’m simplifying here to make a point and I’m kind of thinking aloud a bit, so bear with me, please.
School A graduates 180 students a year. School B Graduates 800 student per year.
School A offers a more intimate experience for all of its students and prides itself on making faculty available for teaching and less focused on research. School B breaks the class into smaller groups to try to create more intimacy, but in the end, it remains a large and less personal environment. School B’s faculty is focused more on research – and its publications are highly respected in the field, even used by faculty in School A, as well as in other biz schools around the world. The alumni giving rate is higher for School A. The alumni network of School A is very tight, even from year-to-year. At some point School A increases its class size from 180 to 270 students, which is still a lot less than 800. In the meantime, School B has not increased its class size from 800. So School B has a lot more money to invest in its research because it has revenue from so many more students. However, School A can buy that research and distinguish itself with faculty who have more time available per student. Even if School A’s revenues are less, its cost of servicing the students is less than that at School B. I haven’t looked at the profit margins of each school, but both have survived for many, many years.
As to how this relates to the dilemma faced by the indie artist in this forum: well, it leads me to believe that if you can get past the random numbers game to the key connections game and know what it is that distinguishes you, then you’re onto something. Depending on what you are offering, I would say that smaller and more connected is better than larger and impersonal.
That brings us to what the artist is offering. If the artist has something s/he can sell to a mass market, then maybe s/he can compete on price to gain market share. If you’ve got a real niche type of offering, then I think the smaller-and-more-connected method might work better. The laboratory is open for research.
For what I do, I’m inclined to believe that anyone who wants my music, who is truly a fan, is going to be willing to pay for it. There are always going to be some with empty pockets who love an artist dearly but will live solely on the freebies. However, for the most part, I think the fans will pay. But how much?
That brings me to the question of price. Back in the day, I thought that naming your price was all part of the game. Employers wanted (and still do) want to know your asking price and this happens when I get calls for gigs, too. If I can beat them to it by asking their budget, I always do. (I’m not talking about the club gigs referenced above because they are different).
So how does my live performance pricing differ from my recorded music pricing? Ah, yes, iTunes and that lot. So we’ve commoditized downloads. I get it. I’m hip to that. Lucy says that the price might actually be hovering around a quarter. Whoa. I was cool with a dollar per download because for my first album I charged $11 and there were 11 tracks on the album and my spin was that it was $1 a track – and that was before digital downloads really took off and became accessible to all artists. . But a quarter per download????? No way, not me. I’m not hip to that. Competing on price is not a wise move in most industries, but what do I know about music, because here I’m an artist trying to do my thing and the whole “industry” bit escapes me at times. I agree with Alexa that Radiohead’s strategy is indeed a lesson for remembering to put a spin on whatever your spinning out of your doors and that’s what I’m going to take from that for the moment.
I checked out this article on WikiHow (which was started by someone at School A) and a number of authors put together a short list of about 12 short-n-sweet pricing strategies. http://www.wikihow.com/Price-Your-Product
The first two sum up the choices we are faced with here and I want to be clear that I’m quoting directly here:
“1. Premium Pricing: Use a high price where there is uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charged for luxuries.”
“2. Penetration Pricing: The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.”
As for the second pricing strategy, I understand that what we are considering is upselling to another product and not necessarily increasing the price of whatever you used to draw the potential fan your way initially.
As for the first strategy, am I offering a luxury? A luxurious experience? Well, I don’t know about all that, but I’m definitely offering something that I perceive to be unique. Now I’m about to release my sophomore album and am again faced with pricing. So this issue is definitely one that is critical for me right now.
I refer to the Tale of Two Pianists.
There was a pianist playing in the middle of a terminal at a major US airport a couple of years back. I tipped him something and I took a look at the spread of merch he was offering, mainly consisting of CDs – maybe only CDs. The price? TWENTY dollars per disc. Yep. And people were buying. Was I buying? No. But I wouldn’t have bought the CD for less either - it wasn’t something I really wanted to collect at that moment, much as I enjoyed listening to him. I was not his model buyer because I was trying to avoid impulse purchases and was saving every dime for my own project.
Part of me thought (just being honest here so forgive me, but I am human) - who does he think he is that he can charge that much per CD for a solo piano recording and I’m over here emptying my pockets, having put together an album with multiple musicians of a high recording quality? Evidently all that mattered to him was that he thought he could do it. Of course this is just an anecdote and I don’t know what his annual income statement looks like, but it made an impression on me that he seemed to be selling those discs for $20. Could he still sell at that price today? I don’t know. It made me think twice about my own pricing.
Another pianist was playing at an outdoor promenade also in the US – incredibly talented older fellow who had been around the block a few times. I even sat down and talked with him for a bit. He was a sweetheart and he gave me one of the CDs that he was selling. Now I don’t recall how much he was selling them for, nor do I know how much he sold them for, but the recording quality was atrocious even for a give-away (and I can’t say much for the marketing package either).
Speaking of recording quality and pricing, some folks I know just put out an album for fun (so my friend says) on Cdbaby which they are selling for 60% off of the $10 as an introductory deal. I was psyched for his band, but when I listened to the clips, I was disappointed with the recording quality. Consumer beware. Probably their fans will buy it anyway out of love. I found the pricing curious. I’m going to ask him about it.
I felt I learned a bit of a lesson when I was doing a showcase of multiple artists and the CD salesperson asked me for how much I was selling my CDs. I told her my super cool prime number tricky figure of $11 and she dropped her jaw as she was dealing only in cash and wanted the least hassle possible. She told me “No.I won’t sell them for $11. Choose $10 or $15”. So in that split second, I went with $15. That night I sold 3 or 4 CDs and I probably wouldn’t have sold more at $10, though I can’t be sure, but it was just based on the fact that the people who bought them were people who I think would have bought them anyway. These days, when I hear folks say that they balk when they see an artist selling CDs for more than $10, I try not to worry too much about those folks – at least not for the moment.
Truth is, I’ve only ever heard one person say that but she probably has friends who feel the same about artists “trying to get too much for their music”. What I try to do is to have an “about the album” card/page nearby that lets folks know what they are getting for their money - that the album has such and such musicians on it, that it is a high quality recording, maybe with some reviews - without getting too technical. Often folks read that before purchasing the CD. Sometimes they never notice that page and they’ll buy it anyway, but I think that the value proposition is key (someone suggested something similar in one of the posts above.)
All of this being said, I do think that fanbase size matters and I think each artist’s goal will be different. The larger my base, the more people hear of my work. But if that large base is spread all over the place in 12 cities and in different countries, then I think the large size of the base may have less impact. So that might be something to consider also. Better to have 1,000 fans in one city or 1,000 fans who all connect regularly through some online forum than 5,000 fans who don’t feel that they are part of any kind of community. I guess it boils down to what you are offering … Are your offerings more like School A or School B? And can you provide a forum - whether live or online - for those fans to connect?
And, after all of this, do I know how much I’m going to price my next album? No, not just yet, but I will come up with some price that’s more than zero and I’m not going to leave it up to someone else (at this stage).
I feel a bit exposed - zipping through my thoughts like this - but if anyone finds reading them has been worth their while, well, then I suppose that makes it worth the while for me to have written them down.
Thanks -
Manisha
Rob,
Authenticity is key for a successful independent musician and when you talk about yourself and what you do, your music origins, people get to see your personality and that’s how building a fan base can happen.
Thanks for sharing your example of free giveaway and then sold CDs on the back of it. I think that’s what a lot of the recent giveaway examples are doing - they are giving their best tracks, with the best hooks, away and then receive a storm of sales. Interesting.
Kavit
Manisha,
Thanks for your faculty comparison. I’m quite interested in the idea of small and more personal because its a way to build a solid following rather than working with thousands who you may not even be able to manage and build a relationship quite well with. In my own music career playing Tabla, I chose to go the small and personal option and I’m happy with what I’m achieving.
I don’t believe in price competition for music because there are literally billions of tracks out there and no-one is going to search and buy the most competitive one. It’s just not realistic. You’re spot on when you say they’ll buy if they like it - and that’s really the bottom line.
Your tale of the pianist is an inspiring story and here’s another person for who it has worked. Sitting on the Santa Monica pier playing keyboard, this chap sold 15,000 CDs in 18 months. Here’s the video interview with Bob Baker - http://www.youtube.com/watch?v=ZUfXB5uY9KA
I’m a strong believer in the “start local, grow global” strategy that I’ve outlined before on this blog (worth a read if you haven’t read it yet) and its all about concentrating your efforts in your area, growing your fan base and then slowly expanding outwards. That will save the effort of a large fan base all over with less impact. I totally agree on this point.
I think we think we can do too much in a year, but estimate so little in our entire lifetime and as a result, most people just rush to expand without properly planning out their strategy. It’s really all about being thoughtful through the entire process.
So, basically, you’re saying that what you decide to offer will impact how you price your next CD, right? You could offer a whole lot and sell for $20 bucks or more. How do you know where to draw the line on what you’ll offer?
Thanks for sharing your thoughts Manisha in length - it’s much appreciated.
Kavit
In general, we will do “door” gigs or very-small-guarantee gigs as a promotional exercise, not much different from playing on the street with a tip box, IMHO. In the end, you’re only doing it to get email addresses and sell CDs, and if the venue isn’t helping you to do that, they have no business asking you to essentially play for free.
(Note that they never offer you a piece of the bar till, just the “door” revenue, so the venues have an incentive to give away the cover charge and thus put the customer’s money in their bar till and thus in their pocket, not yours. Whenever I ask “door” gig places if they are going to give us a share of the bar, they look at me funny, and I say, well, you seem to be asking me to be a partner in your business, so it only seems fair that I should share in all aspects of a successful night. I know that they aren’t going to agree to anything fair, I just want them to that I am aware of what they’re trying to pull).
I think it’s entirely possible for companies to take a percentage of profits on merchandise for mid-level artists, but, again, in reality this needs to be performance-based and not just “here, take our product, give us 10%”. My feeling is that the best model would be one where the band hires an artist to create merch (or pays for the production of their CD) and retains all rights, but signs a contract with a partner to sell them the merch at a favorable price, like a distributor, and then in turn the partner manages all aspects of selling the product at shows, simply as a retailer, including any taxes that may be due. In addition, it would seem fair to pay a bounty for every valid email collected by the vendor on behalf of the band.
Any other kind of deal is essentially giving away the farm, and selling licensing rights outright for any intellectual property is selling the seed corn. Your band logo might be the single most profitable piece of property you own over the long haul, and IMHO you should always take the long view and try to create deals where if you can get someone to manage the logistics of sales, you still retain a large share of the revenue generated, and their incentive is to sell more — maybe to get price breaks by purchasing larger quantities of product. I have used this strategy for a long time, and it results in partnerships that are truly mutually beneficial and in which both partners have congruent interests and goals, and — most important — both feel like they are getting a fair deal and benefiting from the success of the other.
Most corporate industry deals are not based on anything like an equal partnership, and they count on the fact that most save money the one place that they shouldn’t — on attorney’s fees.