 |
Pay-What-You-Want Will Change The Music Industry |
 |
Things have cooled off a bit after the hype surrounding Radiohead’s In Rainbows release, the first major release to use the innovative pay-what-you-want business model. In the interim, two other notable artists have released work on the pay-what-you-want model, Trent Reznor and Saul Williams’ Niggy Tardust and comedian Steve Hofstetter’s The Dark Side Of The Room. Taken together, these three examples prove the success of the business model and foreshadow the game-changing effect it will have on the industry.
It’s pretty easy to rebut the typical arguments made against the model:
- This is a one-shot phenomenon. At some point the hype will die down and people will lose interest.
As mentioned above, three notable albums have now been released on this model, all months apart and in very different genres. At the very least, the pay-what-you-want model seems to show a clear trend. This model offers the promise of free or cheap music to fans. Free or cheap music as an idea has been around for years (see file sharing) and it won’t go away anytime soon. Sure, the big media hype surrounding this model will die down, but for those interested in listening to music or discovering new artists, these models will always be attractive. Simply put, there’s no risk.
- The model only works for famous artists who can make a splash with the media.
This model will never make an unknown band a million dollars. Clearly, larger bands with larger reach will be more successful. However, releasing an album under this model will increase a band’s publicity and quite possibly make them more money than they would have made otherwise. For one, this model has less overhead costs. A record label doesn’t get a cut, a physical CD doesn’t need to be made, and because the cost of entry for a customer is almost nothing, artists spend less money on promotion.Second, because this model allows users to download for free, artists will reach more people with it. Those that are sitting on the fence, or just don’t know enough about an artist’s music to purchase a real CD, can download for the price they are willing to pay. The model may actually work better for small acts, as it could dramatically expand their fan base, which is really what most small bands, much more than record sales.
- People simply won’t pay for something that they can get for free.
This is not true. iTunes is a great example. Anyone can download a file sharing client and find free music. The threat of being caught for file sharing and served an RIAA lawsuit is minimal. Yet, iTunes sales topped 1 billion downloads in February 2006. Clearly, people are willing to pay for something they can get for free.
As a second example, Steve Hofstetter has released sales numbers from his pay-what-you-want experiment. According to him, the average downloader pays $6 for something he or she could get for free. The concept of tipping is ingrained in our society, and so it’s not hard to understand why people are willing to tip for a decent product. Buskers have played for tips on city streets for hundreds of years. Indeed, the modern concept of a professional musician grew out of the medieval traveling minstrel, who worked for tips. Why, then, is it surprising that music may return to its pay-what-you-want roots?
- Artists will not make as much money.
Steve Hoffstetter said he made more money in the first two days of his current album’s sale than he did in the first two weeks of his last album’s sale. He said he makes on average three times the royalty rate on each sale than he made selling albums the traditional way. Once Radiohead releases their sales numbers, I have a feeling they will come out ahead in revenue as well.To make more money on an album, an artist has to average more than $2 per download, as $2 is about the upper limit artists can expect to earn from royalties using traditional album sales. So far, the statistics say hitting that $2 average using the pay-what-you-want model isn’t that hard to do.
To be sure, the pay-what-you-want model won’t replace the traditional model anytime soon. However, paying what you want contains some distinct advantages beyond the monetary incentives laid out above. Artists using this model don’t have to deal with a record label, leaving them more artistic and marketing freedom. They don’t have to worry as much about file sharing either, as users can get music for free directly from the artist. Plus, fans appreciate a business model that allows them to pay the artist what they honestly think a work is worth.
We all know the music industry is transforming. Rumors leaking from the Radiohead camp say that their album was downloaded over 1 million times. The pay-what-you-want model works better for fans and artists alike. Just about the only player it doesn’t work for is record labels. But they’ve been working against the interests of artists and fans for so long now, they can hardly expect any sympathy. Their business model will be supplanted by one that not only cuts out the middle-man but delivers a better and more fairly priced product as well.
I think the pay-what-you-want business model is going to play a large part in that transformation. Do you agree?
MUSICIANS: TAKE ACTION! - MUSICNEUTRAL.com
We%u2019ve started a cause at http://www.musicNeutral.com encouraging “free” music by DONATING TO MUSICIANS. This is still a new site and a new concept for many people. Please leave us your comments, ask questions and start accepting donations!
I have a better idea then. Why not just make the CDs a minimum of $2 to download? I know I’d more likely risk buying a crap album for $2 than $18. I just quit buying music. I dont’ steal it either (download, whatever).
I would pay $2.50(USD)-$5.00 for a 10-20 track download, depending on the artist. No worries.
3 albums does not constitute a trend, nor does it “prove” anything (really, for statistical significance, a sampling of at least 30 candidates from a population must be represented).
True on both counts, however the concept of “larger bands with larger reach” will eventually fall by the wayside, as no bands become “large” in today’s sense, the playing field will (over the course of decades) become levelled. Still, it’s not going to happen due to the “freeloader phenomenon.”
The most frustrating thing to me about the Radiohead experiment is that many listeners today have a sense of “sticking it to the man” to justify downloading music. I can understand not wanting to line the pockets of record company executives, however there’s almost a sense of entitlement when it comes to downloading / sharing music. This sense carried over to the Radiohead album and almost 70 percent of the people who downloaded it didn’t pay a dime. In this case, all of these “fans” didn’t stick it to anyone but a band they claim to like. 70 percent is not a winning business proposition for anyone.
I’m not denying that the music industry is transforming, however I think it’s a stretch to say that the pay what you want model is sustainable. The analogy relating back to buskers and medieval minstrels holds up until you realize that their music could not be recorded or replayed without them being there (I understand that other musicians could have played it, however I can sing anything off of “Achtung Baby” and I’m not exactly Bono (if you catch my drift).
What this will do, if it becomes prevalent, is create pressure on the media companies, who will be forced to take less from established artists who have less need to pay for traditional marketing. If this happens, the “standard” recording deals offered by media companies to lesser-known artists will be pressured as well.
Concert deals, however, will be very, very different…
I know a few artists, some of them have been big, and are on downward spiral, others will probably never make it big, but would like to make a living out of music. The record companies lure them in with the Hollywood dollars, and the high life, and leave them by the wayside if their first album isn’t a hit.
But, they still persist in the music industry and make a buck (or quite a few bucks) from live shows. I believe that Radiohead will probably make break even their album, but make a killing on their tour. But this is always the aim with albums, they are used to promote tour ticket sales.
The only part of the record business that gets harmed by downloads is the record companies, which are just glorified venture capitalists and advertising firms.
The bands know that 10 million downloads, translates to full stadiums on a world tour, and at $60 a head, that is a pretty good income. Just not for the labels.
Yes.
As soon as the first MP3 was sent from one computer to another computer, without any royalty, sales ($), or tax, the idea of ever paying for music was void. An MP3 means no actual product is being produced; thus meaning the internet becomes a vessel for sending various bytes of information as 1s and 0s. I say, how is this worth anything? Why should I pay for information, it is not a tangible product? I like the pay-what-you-want model (one rule is there has to be a minimum price and not free). It is the ideal version of capitalism. A penny a song? Imagine if 1/100th of the US population downloaded that song for a penny. As of Jan 29, the US population is istimated at 303,331,415. One hundreth of that is 3,000,000,000 (so say 3 million people buy that song at 1 cent a piece). That comes to $30,000 per song. So say the usual album has 15 songs on it, that would equate to $450,000 per album. That is a lot of money for anyone. Plus, you take out all of the cost of producing a CD (product), which leaves the artist with almost all profit. I think that is fair.