Friday, May 8, 2009

New Business Models

Here are a couple of great clips that complement each other.

Digg Dialogg Series: Trent Reznor
In the first, Trent Reznor of Nine Inch Nails discusses their adoption of alternative compensation schemes for the monetizing of their music. He states that as music is already free their approach is to try to harness goodwill by making money off associated products such as concert tickets and tee shirts. He notes that the band has not done a lot to make money from online advertising, largely because they have not needed to and because he considers consumers to already have sufficient advertising exposure from other sources.

In the process of their recent experiement with new business structures, he states only 18% of consumers appeared to consider the direct payment of money to the artist (as opposed to a record label) as a factor compelling them to pay. He expresses some disappointment, suggesting that he had expected this to be higher. In the end however they did sell more records and make more money than they would have had they used the traditional model that major record labels use. He concludes that while there are a lot of opportunities to make money, that it should not always be about this.

In discussing emerging artists he suggests that new, unique artists that have a desire to 'change the world' should avoid major record labels. Reznor notes that major record labels are primarly interested in making money and that those outside the mainstream will be forced to constantly question their vision and make compromises. In the alternative he recommeds the use of websites, social networking sites such as MySpace, having great video clips and using stunts to attract attention. He notes that the landscape for music has changed dramatically since the late 1990's - instead of concentrated media sources such as radio and MTV, consumers now have access to music through an enourmous range of sources - the trick for new musicians is to overcome the cluter of the internet and one approach is to think strategically about how people find out about music now.

See the clip here on ZeroPaid.

Mike Masniick, TechDirt
In the second clip. Mike Masnick of TechDirt presents a speech on 'How Trent Reznor and NIN Represent the Future of the Music Industry'. Here Mike discusses in detail the gimmicks and strategies NIN have used to attract the attention and sustain the interest of fans.

Whilst signed to a major label in 2007 the band launched the album Year Zero with an internet scavenger hunt. They also left flash drives with music loaded on them in the bathrooms of concerts for fans to find - this music was uploaded to the internet for others to share however the RIAA issued take down notices to sites that hosted it. They also sold the album on a CD that changed colour when it got warm in the CD player.

Since that time the band has taken control over its own business activites and no longer being singed to a major label has meant far greater freedom in using alternative strategies to make money and distribute their music.

When releasing Ghosts I-IV they added value to the music by licensing 36 tracks under a creative commons license, by giving fans the first 9 tracks for free from their website and asking for a $5 donation for the remaining songs and other similar strategies.

This presentation is well worth watching (it is a little Lessig like in style).

Leadership Music Digital Summit 2009 - Mike Masnick keynote address, 3/25/09 from Leadership Music Digital Summit on Vimeo.

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