Year in Review: New Business Models

Two thousand and eight was another year of experimentation with many artists and labels trying out different business models in the digital music environment.

These included:

Radiohead released their album In Rainbows as a pre release promotional strategy and allowed fans to set the price when downloading it.[1] They then removed the free downloads and sold the CD in stores, selling 1.75 million albums.[2] When including all digital sales the number of units shipped was reported to be 3 million.[3] In addition to this between October 10th and November 3rd 2007 there were 2.3 million downloads facilitated by BitTorrent.[4] The band then went on to sell out their tour.[5] Radiohead made it to No1 in both the USA and UK.[6]

Trent Reznor and Nine Inch Nails, who had already begun experimenting with promotional strategies such as hiding flashdrives in toilets of their concerts for their fans to find, released a four disc instrumental work called Ghosts I-IV with a tiered pricing structure.[7] Fans were able to download volume I for free by registering on the bands website or through BitTorrent and other file sharing networks, or they could pay $5 for all four of the volumes plus a 40 page PDF booklet, or they could elect to pay $10 for the albums on two CDs (with an immediate download), or they could pay $75 for a deluxe edition set which included the two CDs, a data DVD and Blu-ray disc or fans could purchase a limited edition set (2,500 copies) of the music plus all of the material in the $75 package plus four LP Vinyl records and two limited edition Giclee prints for $300.[8] The album was also licensed under a Creative Commons Non Commercial Attribution license to enable free sharing.[9] The album grossed $1.6million in the first week it went on sale.[10] Nine Inch Nails then released another album called The Slip completely for free to thank their loyal supporters.[11] The album was also available as a limited numbered edition in CD, DVD and vinyl with 250,000 copies pressed.[12] The band also later released a Google Earth map showing where the 1.4 million people who downloaded The Slip were geographically located.[13] They later engaged in direct fan consultation and asked fans to complete a survey on their website to enable them to learn more about what their fans wanted in the future.[14] To further engage fans Reznor also hid concert tickets around Los Angeles and posted clues and coordinates on their website so fans could find the free concert tickets.[15] In preparation for their upcoming concert they also gave away a free EP of the supporting artists for fans.[16] Premium tickets for the concerts were made available only through the bands website to ensure that fans and not scalpers would be able to access them.[17]

Saul Williams, with the assistance of Trent Reznor, also enabled fans to downloads his album for free or pay $5.00.[18] After an older track of Williams was used in a Nike commercial, downloads increased and he made over $300,000 from the album and his concert series sold out.[19] Over 225,000 people downloaded the album with 60,000 electing to pay $5.00.[20]
Coldplay released a single ‘Violet Hill’ for free ahead of the release date of their new album.[21] On Last.fm the track was played more than 10,000 times within the first 5 hours of its availability.[22]

Mudvayne started a scheme called The Album is the Ticket which bundled a one year subscription to the bands fan club with each album purchased.[23]

Marillion allowed their new album to be downloaded for free and used file sharing networks to assist with the distribution. Fans were a little disappointed with the use of DRM – the band used Music Glue to help gather the contact details of fans which required them to enter their email address before being able to swap encoded music for DRM free downloads. This was to help the band to develop their fan base and enable them to contact them about upcoming concerts.[24] In the past the band has produced a number of albums by getting fans to invest prior to their recording.[25]

Hugh Cornwell, formerly with the band the Stranglers, offered his latest album as a free download from his official website and at the same time gave fans the chance to buy a CD or vinyl copy. He also sold a DVD of the recording process of the album which was released as a film and played in cinemas which he attended and participated in a Question and Answer session with fans.[26]

Show of Hands is another band that has embraced file sharing stating that the technology enables them to expand their audience and has improved their record sales.[27]
Penny Wise gave away an album on MySpace which was downloaded 400,000 times in conjunction with sponsorship from Textango.[28]

Off Spring released a free single ‘Hammerhead’ ahead of their album ‘Rise and Fall’.[29]

McFly released a new album and allowed it to be distributed for free in a UK newspaper.[30]

Prince who released a new album last year and gave it away for free with a newspaper, sold out 21 concerts.[31] In the past he has also experimented with company sponsorship, setting up a subscription fan club and regularly performing at a Vegas venue that he purchased.[32]
Jill Sobule set up a tiered priced donation and pre purchase scheme which included a range of packages for fans to buy to help raise funds to support the recording of a new album ranging from $10 for a digital download when the album was released to $10,000 for the opportunity to sing or perform on the album.[33]

Francis and the Lights are another band that experimented with a new business model, setting up a company and allowing fans to invest in the recording of their new album. They raised $100,000 from the Normative Music Company.[34]

Tasmin Little, a classical violinist, also released a new album on the internet for free to increase her fan base.[35]

A number of organisations are also emerging that help independent artists to develop and sustain new business models. These include:

SongVest allows fans to invest in their favourite artists by giving them the chance to own a percentage of the writer’s shares of songs. The site operates on an auction basis allowing fans to bid for royalty shares enabling them to get paid each time the song is used. However the artist retains the right to determine when the song can be used.[36]

BandCamp is a system which facilitates the set up of websites for bands allowing them to stream their tracks, give away free downloads, allows fans to set their own price for tracks and/or let the band set the price to be paid for their music.[37]

SellABand is a UK business that helps bands to raise the finances required to record an album and then supports the artist by providing production and marketing assistance. Fans receive dividends based on their investment in the album.[38]

ArtistShare has operated since 2003 and allows fans to help finance albums by gaining access to the creative process. The organisation offers limited edition recordings, VIP access to recording sessions and credits listing on the CD.[39]

BandStocks allows fans to invest as little as £10 to assist in the financing of an artist’s record in exchange for a financial stake in the album, credits and special privileges.[40]

CASH Music is an organisation seeking to enhance the community relationship between fans and bands as well as offering a range of business models for artists including selling and giving away works and a donation scheme to help finance artists.[41]

PopCuts is a new scheme started in Berkeley which charges users $0.99 cents for a song but then rewards them by giving them a percentage of in store credits when other people purchase the track. The scheme rewards early purchasers the most and at the time of its launch had a catalogue of 700 songs from 200 artists. Ten to twenty percent of the sale price goes to the company with the artists able to determine how much of the rest of the money gets passed on to fans.[42]

TopSpin is not a record label but a business that seeks to assist bands to engage in ecommerce and to embrace new business models in the digital environment.[43]

SliceThePie is a music site that allows fans to explore new music and raises funds for bands to record albums. In March 2008 the first album was released by The Apls after they raised the minimum $30,000 to enable them to record. The site started in June 2007 with 12 albums financed so far from the 7,000 artists that have signed up.[44]

Jamendo passed the milestone of making its 10,000th album available for free in 2008.[45]

In recent times there has been a rise in the number of music sites that offer content for free.
These include: iLike, Altsounds, bt.etree.org, Legaltorrents, Stereogum, SXSW, Unsigned Band Web, Soundclick’s music page, Honc, Garage Band, DMusic, Fuzz, iCompositions, The Internet Archive, Jamendo, Peoplesound, Epitonic, Fat Wreck Chords, Hellcat Records, Subpop, Stereokiller, Anti’s Slogan, 3hive, itsfreedownloads, mp3.com, Purevolume, Musicdownload.com, Last.FM, Stage.FM, iSound, We7, SpiralFrog, Blentwell, MTV, ClassicCat, and Spinner[46]. Some of these sites allow streaming, others are supported by advertising and some allow free downloads.

Bundling infinite goods with the sale of scare goods such as concerts and merchandising has become more widely accepted as a genuine business model in the digital age. Whilst noting that merchandising is merely one part of the equation of the new business models that are emerging, the T-Shirt industry turns over $40 billion per year compared with global record sales of $31.8 billion in 2006.[47]

The new business models that have emerged all have the fans at the centre of their structures leveraging financial support from free goods. One theory that has emerged regarding these business models is that to be successful, bands need to establish a core group of fans. The term coined to describe this theory was ‘1,000 True Fans’ and was first noted by Kevin Kelly in March 2008 as being the point at which artists from the long tail are able to garner enough support to sustain their careers.[48]

[1] TechDirt, Radiohead's Physical Album Selling Well (8 January 2008) <http://www.techdirt.com/articles/20080107/191334.shtml> at 11 January 2008
[2] TechDirt, Details Released On The Radiohead Experiment Results: A Tremendous Success (16 October 2008) <http://www.techdirt.com/articles/20081015/1640202552.shtml> at 19 October 2008
[3] Digital Music News, Jackpot at the End of In Rainbows? Radiohead Sales Surpass 3 Million (15 October 2008) <http://www.digitalmusicnews.com/stories/101508rainbow> at 15 October 2008
[4] Digital Music News, The Radiohead Campaign: An Unqualified Success? (4 August 2008) <http://www.digitalmusicnews.com/stories/080308radiohead> at 7 August 2008; Financial Times, Music industry ‘should embrace illegal websites’ (3 August 2008) <http://www.ft.com/cms/s/0/e72884f6-6175-11dd-af94-000077b07658.html?nclick_check=1> at 6 August 2008
[5] Digital Music News, The Radiohead Campaign: An Unqualified Success? (4 August 2008) <http://www.digitalmusicnews.com/stories/080308radiohead> at 7 August 2008
[6] Digital Music News, Radiohead Perches Atop US Album Sales Chart (9 January 2008) <http://www.digitalmusicnews.com/stories/010908radiohead> at 11 January 2008; Digital Music News, A More Traditional Radiohead Scores British Top Slot (7 January 2008) <http://www.digitalmusicnews.com/stories/010707radiohead> at 11 January 2008; The Register, Radiohead top UK album chart (7 January 2008) <http://www.theregister.co.uk/2008/01/07/radiohead_album_chart/> at 8 January 2008
[7] TechDirt, Trent Reznor Continues To Show Different Ways To Connect With Fans (14 July 2008) <http://www.techdirt.com/articles/20080713/1721051663.shtml> at 16 July 2008
[8] Digital Music News, This One's On the Me: Reznor Just Gives It Away (6 May 2008) <http://www.digitalmusicnews.com/stories/050508reznor> at 7 May 2008; TorrentFreak, NIN Confirms Uploads to Public and Private Torrent Sites (5 March 2008) <http://torrentfreak.com/nin-confirms-bittorrent-uploads-080305/> at 11 March 2008; ArsTechnica, Reznor makes $750,000 even when the music is free (5 March 2008) <http://arstechnica.com/news.ars/post/20080305-reznor-makes-750000-even-when-the-music-is-free.html> at 6 March 2008; ZeroPaid, NIN Releases Part of New Album on BitTorrent (5 March 2008) <http://www.zeropaid.com/news/9305/NIN+Releases+Part+of+New+Album+on+BitTorrent> at 6 March 2008; TechDirt, Trent Reznor Continues Business Model Experiments: Releases Latest Album Online (3 March 2008) <http://www.techdirt.com/articles/20080302/234646401.shtml> at 5 March 2008; Digital Music News, NIN Injecting Steroids Into Radiohead Model (3 March 2008) <http://www.digitalmusicnews.com/stories/030208nin> at 4 March 2008
[9] ArsTechnica, Reznor makes $750,000 even when the music is free (5 March 2008) <http://arstechnica.com/news.ars/post/20080305-reznor-makes-750000-even-when-the-music-is-free.html> at 6 March 2008
[10] TechDirt, Reznor Grosses $1.6 Million In The First Week Of Ghosts I-IV (14 March 2008) <http://www.techdirt.com/articles/20080313/171933538.shtml> at 18 March 2008; Digital Music News, How to Make $1.6 Million In a Week, by Trent Reznor (13 March 2008) <http://www.digitalmusicnews.com/stories/031208reznor> at 18 March 2008; ArsTechnica, Reznor makes $750,000 even when the music is free (5 March 2008) <http://arstechnica.com/news.ars/post/20080305-reznor-makes-750000-even-when-the-music-is-free.html> at 6 March 2008; TechDirt, Nine Inch Nails Sells Out Of $300 Deluxe Edition In Under Two Days (4 March 2008) <http://www.techdirt.com/articles/20080304/162842435.shtml> at 6 March 2008; Digital Music News, How to Make $750,000 Overnight, by Trent Reznor (5 March 2008) <http://www.digitalmusicnews.com/stories/030408nin> 6 March 2008; The Register, Nine Inch Nails cracks net distribution (maybe) (3 March 2008) <http://www.theregister.co.uk/2008/03/03/nine_inch_nails_album_released_online/> at 5 March 2008
[11] Digital Music News, This One's On the Me: Reznor Just Gives It Away (6 May 2008) <http://www.digitalmusicnews.com/stories/050508reznor> at 7 May 2008; TechDirt, Trent Reznor Gives Away New Album As A Completely Free Download (5 May 2008) <http://www.techdirt.com/articles/20080505/0908591030.shtml> at 7 May 2008
[12] TechDirt, Trent Reznor Gives People A Reason To Buy Latest CD Even Though It's Free (25 July 2008) <http://www.techdirt.com/articles/20080725/0215281791.shtml> at 28 July 2008
[13] ZeroPaid, NIN Releases Album Download Details via Google Earth (27 June 2008) <http://www.zeropaid.com/news/9593/NIN+Releases+Album+Download+Details+via+Google+Earth> at 27 June 2008
[14] TechDirt, Amazing What You Can Do When You Don't Sue Your Fans (26 September 2008) <http://www.techdirt.com/articles/20080924/0323382354.shtml> at 5 October 2008; ZeroPaid, Trent Reznor Asks NIN Fans to Take Music Survey (24 September 2008) <http://www.zeropaid.com/news/9772/Trent+Reznor+Asks+NIN+Fans+to+Take+Music+Survey> at 26 September 2008
[15] TechDirt, Trent Reznor Continues To Show Different Ways To Connect With Fans (14 July 2008) <http://www.techdirt.com/articles/20080713/1721051663.shtml> at 16 July 2008
[16] ZeroPaid, NIN Releases Album Download Details via Google Earth (27 June 2008) <http://www.zeropaid.com/news/9593/NIN+Releases+Album+Download+Details+via+Google+Earth> at 27 June 2008; ZeroPaid, NIN Offers Free Download of New Download of New Tour Sampler (7 June 2008) <http://www.zeropaid.com/news/9536/NIN+Offers+Free+Download+of+New+Tour+Sampler> at 9 June 2008; TechDirt, Trent Reznor Continues To Show How Free Music Works In A Business (6 June 2008) <http://www.techdirt.com/articles/20080605/1638421319.shtml> at 8 June 2008
[17] Digital Music News, Reznor Rampage Continues; Touring Experiment Next (5 May 2008) <http://www.digitalmusicnews.com/stories/050508nin> at 6 May 2008; Digital Music News, Marvelous Result: Reznor Disciple Finds $300,000 (14 April 2008) <http://www.digitalmusicnews.com/stories/041308niggy> at 17 April 2008
[18] TechDirt, Trent Reznor's Path To Accepting And Embracing New Business Models (9 June 2008) <http://www.techdirt.com/articles/20080608/2321301340.shtml> at 13 June 2008; TechDirt, Saul Williams Agrees That It's Way Too Early To Be Disheartened (11 January 2008) <http://www.techdirt.com/articles/20080111/111158.shtml> at 18 January 2008; Digital Music News, Reznor Pet Project Yields Mixed Results, Some Cash (7 January 2008) <http://www.digitalmusicnews.com/stories/010707nine> at 11 January 2008; TechDirt, Dear Trent Reznor: Don't Be Disheartened Yet (4 January 2008) <http://www.techdirt.com/articles/20080104/015516.shtml> at 8 January 2008
[19] Digital Music News, Resnikoff's Parting Shot: Where's My Long Tail Playbook? (12 May 2008) <http://www.digitalmusicnews.com/stories/051308parting> at 21 May 2008
[20] Digital Music News, Marvelous Result: Reznor Disciple Finds $300,000 (14 April 2008) <http://www.digitalmusicnews.com/stories/041308niggy> at 17 April 2008
[21] Digital Music News, Offspring Latest to Spin Freebie Single Download (6 May 2008) <http://www.digitalmusicnews.com/stories/050508offspring> at 7 May 2008; The Register, Radiohead diss freetards (30 April 2008) <http://www.theregister.co.uk/2008/04/30/radiohead_in_rainbows/> at 2 May 2008; Digital Music News, Coldplay Tossing Freebie Singles, Live Dates... (29 April 2008) <http://www.digitalmusicnews.com/stories/042808coldplay> at 30 April 2008; The Register, Coldplay in digital and vinyl giveaway (28 April 2008) <http://www.theregister.co.uk/2008/04/28/coldplay_giveaway/> at 29 April 2008
[22] Digital Music News, Coldplay Freebie Draws Healthy Crowds, Healthy Listens (30 April 2008) <http://www.digitalmusicnews.com/stories/042908coldplay> at 2 May 2008
[23] TechDirt, Another Band Starts Bundling Scarce And Infinite Goods (16 October 2008) <http://www.techdirt.com/articles/20081010/1357592518.shtml> at 19 October 2008
[24] ZeroPaid, Marillion Outdoes Radiohead, Releases Album on BitTorrent (14 September 2008) <http://www.zeropaid.com/news/9750/Marillion+Outdoes+Radiohead%2C+Releases+Album+on+BitTorrent> at 21 September 2008; ArsTechnica, Some band you've never heard of releases free album (10 September 2008) <http://arstechnica.com/news.ars/post/20080910-some-band-youve-never-heard-of-releases-free-album.html> at 10 September 2008; P2p Blog, Will Marillion P2P release backfire? (10 September 2008) <http://www.p2p-blog.com/item-843.html> at 12 September 2008
[25] TechDirt, Marillion Takes The Next Step And Gives Music Away For Free (11 September 2008) <http://www.techdirt.com/articles/20080910/2316262230.shtml> at 14 September 2008; TechDirt, Musician Talks About Success In Getting Fans To Pay For The Album Before Its Created (15 August 2008) <http://www.techdirt.com/articles/20080814/0302431975.shtml> at 20 August 2008
[26] TechDirt, Hugh Cornwell Is Still Not A Taxi Driver; Musician Learns To Embrace Free (16 September 2008) <http://www.techdirt.com/articles/20080910/0340092223.shtml> at 21 September 2008
[27] TechDirt, UK Band Admits It's 'Utterly Dependent' On Piracy (27 August 2008) <http://www.techdirt.com/articles/20080826/2227062107.shtml> at 1 September 2008
[28] Digital Music News, Pennywise, Poundwise: MySpace Free Experiment Pays Off (15 May 2008) <http://www.digitalmusicnews.com/stories/051808pennywise> at 21 May 2008
[29] Digital Music News, Offspring Latest to Spin Freebie Single Download (6 May 2008) <http://www.digitalmusicnews.com/stories/050508offspring> at 7 May 2008
[30] Digital Music News, Newly Independent Pop Band McFly Gives Away Free CD With Newspaper (27 June 2008) <http://www.techdirt.com/articles/20080627/0135431533.shtml> at 27 June 2008
[31] TechDirt, EMI Brings Newspaper Free Music Giveaway To The US (30 January 2008)<http://www.techdirt.com/articles/20080129/192849117.shtml> at 4 February 2008
[32] TechDirt, Prince: So Close, Yet So Far (29 October 2008) <http://www.techdirt.com/articles/20081023/1928292632.shtml> at 30 October 2008
[33] Wired, Jill Sobule Goes to Fans for Album Financing (5 March 2008) <http://blog.wired.com/music/2008/03/jill-sobule-goe.html> at 6 March 2008; TechDirt, Jill Sobule The Latest Musician To Embrace New Music Business Models (16 January 2008) <http://www.techdirt.com/articles/20080115/095022.shtml> at 18 January 2008
[34] TechDirt, Band Incorporates As A Company And Raises Money, Rather Than Signing With A Label (6 November 2008) <http://www.techdirt.com/articles/20081105/0239362744.shtml> at 7 November 2008
[35] TechDirt, Violinist To Release Record For Free Online (9 January 2008) <http://www.techdirt.com/articles/20080108/15161945.shtml> at 11 January 2008
[36] ZeroPaid, SongVest - Buy a Percentage of Songwriter's Royalty Check? (13 September 2008) <http://www.zeropaid.com/news/9747/SongVest+-+Buy+a+Percentage+of+Songwriter%27s+Royalty+Check%3F> at 21 September 2008
[37] TechDirt, So, This One Time, At Bandcamp, I Made It Easy To Offer Fans New Music (17 September 2008) <http://www.techdirt.com/articles/20080917/1441412296.shtml> at 21 September 2008
[38] Digital Music News, Fan-Funded Space Starts to Grow, Slicethepie Rumbles (28 February 2008) <http://www.digitalmusicnews.com/stories/022708fan> at 29 February 2008
[39] Artists Share, About Us <http://www.artistshare.com/home/about.aspx> at 7 December 2008
[40] Bandstocks, How it Works: One Minute Version for Artists <http://www.bandstocks.com/Page.htm?action=HowItWorksArtist> at 7 December 2009
[41] Creative Commons, CASH Music (29 July 2008) <http://creativecommons.org/weblog/entry/8602> at 20 August 2008
[42] Siliconvalley.com/Associated Press, Berkeley-based music site gives fans a cut of tune sales (3 September 2008) <http://www.siliconvalley.com/news/ci_10370690> at 5 September 2008
[43] TechDirt, The New Music Business: Enabling Musicians To Take Advantage Of New Business Models (24 June 2008) <http://www.techdirt.com/articles/20080623/0154541476.shtml> at 26 June 2008
[44] Digital Media Wire, Music Community Slicethepie Releasing First Fan-Financed Album (6 March 2008) <http://www.dmwmedia.com/news/2008/03/06/music-community-slicethepie-releasing-first-fan-financed-album> at 18 March 2008; Digital Music News, Fan-Funded Space Starts to Grow, Slicethepie Rumbles (28 February 2008) <http://www.digitalmusicnews.com/stories/022708fan> at 29 February 2008
[45] Creative Commons, Jamendo Publishes 10,000th CC-licensed album! (20 June 2008) <http://creativecommons.org/weblog/entry/8383> at 27 June 2008
[46] ZeroPaid, Where to Get Free and Legal Music (3 September 2008) <http://www.zeropaid.com/news/9732/Where+to+Get+Free+and+Legal+Music> at 4 September 2008
[47] TechDirt, Turns Out There's Lottttttttssss Of Money To Be Made In T-Shirts (26 November 2008) <http://www.techdirt.com/articles/20081124/1709222941.shtml> at 28 November 2008
[48] The Technium, 1,000 True Fans (4 March 2008) <http://www.kk.org/thetechnium/archives/2008/03/1000_true_fans.php> at 23 March 2008; Digital Music News, The Best Kept Secrets Behind Viral Distribution... (20 March 2008) <http://www.digitalmusicnews.com/stories/031908youtube> at 23 March 2008; TechDirt, Does The Math On 1,000 True Fans Add Up? (14 March 2008) <http://www.techdirt.com/articles/20080312/095631518.shtml> at 18 March 2008; TechDirt, The Path To Success As A Content Creator: Building Up Your True Fans (5 March 2008) <http://www.techdirt.com/articles/20080304/174129438.shtml> at 7 March 2008