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Free Music Continued (responding to Steve and Dawn)

Comments (35) | Posted June 4, 2007 in Venture Capital and Technology

Comments

Fred, you wrote...

"many fewer ads than traditional radio because the costs to operate a free music service just aren't that high."

This is only true in the small scale. The power of broadcast radio is the infrastructure cost for supporting the incremental listener is essentially zero. While traditional broadcasters have large upfront capital expenses, once that nut is covered it's pretty much all profit.

In online music there is a linear correlation between number of listeners and infrastructure costs. There is little or no economy of scale.

http://foneshow.blogspot.com/2007/04/internet-radio-is-in-big-trouble.html

Posted by: Erik Schwartz | Jun 4, 2007 7:52:05 AM

We have done a lot of analysis on the issue of how many ads are required to support on-demand free music. The answer is more than 5 minutes but much less than the amount on music radio. You are right Fred that the ads become part of the listening experience. Check out the Ad-Supported Music Central blog:
http://ad-supported-music.blogspot.com/

Posted by: Marc Cohen | Jun 4, 2007 10:02:38 AM

Let's not forget that artists can make additional income through multiple revenue streams, and that doesn't mean just selling ads to make a decent living. Artists who wan to survive will have to think like a business and develop other ways of monetizing their intellectual property through the web. Ad revenue should only be a piece of the pie, not the whole pie.

Posted by: eric hebert | Jun 4, 2007 11:34:48 AM

The disconnect here is that you (Fred et al) are not an artist, you do not create art, so don't attempt to think like someone who does. Artist don't think like business people (Example - Gene Simmons, good business, bad art), and they don't want to - it's very much a mutually exclusive deal.

Artists will balk at your business model, end of story. If they don't, I'll bet their record sucks.

"They won't need a record label to sit between them and their audience."

Who, then, is going to pay for the production of the record?

Oh, the producer, the engineer, and the studio will all get revenue from advertising...

Yeah right.......

Experiment all you like, I'll be at home with my vinyl collection of great records made by artists supported by labels.

Rock is deader today than it ever was.....

Posted by: jackson | Jun 4, 2007 12:11:34 PM

Fred - I hear what you say about music - it is difficult to see any model other than free prevailing, and musicians have other revenue streams (concerts, merchandise) that will be enhanced by the wider exposure free will bring.

I'm not with you on other forms of media though. TheGuardianUnlimited - the UK's most successful traditional newspaper new media play is very popular but still loss making.

Throughout history there has been a range of fully ad supported content, partially ad supported content (ie low subs/cover price) and paid for content. In general to get to the higher quality stuff you have had to pay - the ad revenues alone have not been sufficient to cover quality journalism/production.

I don't see how the internet changes that - sure distribution costs are lower, but at the same time audiences are more fragmented and more fickle. I think we will all have to get used to paying for content on the web at some point - I am mostly thinking about news and video here. This will be a painful adjustment and requires big shifts in strategy so won't happen quickly - but I kind of think it is inevitable. Without it there won't be enough money for journos and film producers and they will take their talents elsewhere.

Think about web journalists, ie celebrity bloggers, you mention Om Malik - there aren't many of these guys and those there are don't look like their businesses could ever scale to something that might replace newspapers. Not on the current model anyway.

Posted by: Nic Brisbourne | Jun 4, 2007 12:49:06 PM

Fred,

I'm not sure it's fair to equate free music with free print content. Can you equate the online archiving of an article from the Times, in which the author was originally paid by the newspaper's staff, with the free sharing of a music file, for which the musicians was paid an advance against sales? Steve may have been alluding to the need for the music biz to adopt a new model to make that equation fair, i.e., convert musicians to a music company's "staff," as the newspaper reporter is on the Times staff or the studio starlet was in the old days of moviedom.

The NY Times is probably making a good chunk of their money through search. They've got a premium AdSense syndication model that works great because the print model offers audience & archives: they've already established themselves as credible and they've got loads of articles you can search. And freely searching those archives is made possible by contracts that include digital rights in perpetuity. Not true for the music business.

You may be right that this is the direction the music biz is heading, but the dangers are that the true artists--those who may not have the wherewithal to manage an ad campaign--may get washed out for wont of real development. In this line of thinking, we won't need labels, just MySpace and a good entrepreneurial spirit. And considering the impact Sam Phillips, John Hammond, Clive Davis, George Martin and others have had in developing talent, there's a significant downside there. When Johnny Cash arrived on his doorstep wanting to sing gospel, Sam Phillips told him to "go home and sin, then come back with a song I can sell." That acumen turned Sun Studio into a national landmark.

The idea that the label is just a middle-man has, I think, given rise to a lot of crap music. Only those with genuine financial capital can afford to break a band these days, so we become captive to managers who build bands like New Kids on the Block and Brittney Spears because those are low-risk investments. Fleetwood Mac took 4 albums to sort themselves out. Arguably so did Dylan.

The role of the label is not unlike the role of the VC. You're both out there looking for new, explosive talent, and once you find it, looking for ways to nurture it. And while the emerging concept of the "public beta" is not unlike American Idol, letting users essentially vote on the entrepreneurial concepts they like best, I'm sure you still see the need for a strong developmental hand for entrepreneurs, who like musicians, need a little direction to maximize a business' potential. If they didn't, Larry Page would still be CEO of Google. No?

Posted by: Chris Kincade | Jun 4, 2007 1:00:00 PM

My brother is the one in the music business, not me, so I won't presume to talk specifics of an industry I'm not fully knowledgeable about. BUT I do intimately know another industry that is in a very similar predicament: cartooning.

Here's some realities:
1) The top, best creators will not support a free model. Yes, wannabes will (I use the term lovingly, btw; it's not derogatory to me) because they are already creating for very little to no money. But people who have worked and sacrificed to make it, who have enjoyed earning money in a way they understand, don't want to have to start over. They would rather drop out and live on what they've already earned than be told their work is no longer worth paying for or yes, I love yoru music, but no, I'm not going to pay for it.

2) Many artists will not be so closely tied to advertising, esp. when they have no control over the advertising. Most people here likely think that Calvin and Hobbes was the best comics strip of all time. Bill Watterson would never be involved in an advertising model, despite the fact (or maybe because of it) that he started off in the ad world. He turned down millions of dollars because he didn't want to see his art commercialized. You might recall he didn't allow t-shirts, Hobbes dolls, etc. etc.

Top artists have artistic sensibilities and that means anti-advertising. No artist wants to be a sell-out. Think about it. How would you feel if you put your heart and soul into creating a wooden cabinet and were told that nobody will pay good money for it, but if you allow advertising stickers to be put all over it, then we can give it away for free?

So, yes, forcing "free" on the industry would be democratization, but the consequence of that is a marked drop in quality, because many of the best creators who have lived under the old system won't participate in a new one that is so drastically different. That's not to say quality can't come up again over time, but it will definitely be felt and who knows for how long?

Besides that, the model is counting on the public subjecting themselves to advertising, something we are increasingly becoming good at avoiding. Product placement is how much advertising is being done these days, hence by Coca Cola reference. You think it won't happen? Back in my day, the Beatles would have never allowed their songs to be used in tv commercials, but they are today. An industry that is dependent on advertising is an industry that goes to bed with advertisers.

Why are people so dead set into turning their favorite musicians into Nascars, anyway? I don't think it's because people won't pay for good music. It's a backlash against excesses of the past. Instead of having a "MUST BE FREE!" hissy fit, why not just say, I'm not going to pay $16 for a CD when I want just one song on it.

There has to be a model between gouging and free. If there wasn't this growing (irrational, shallow and short-sighted) push for free, then somebody could create it.

"Kill the music industry!!!" Well, guess what: you can't destroy a business without destroying the people in it and established musicians are part of that, like it or not.

Posted by: Dawn | Jun 4, 2007 1:22:43 PM

Apologize for the length of this comment, but I have some pretty deep insight into "artistic motivation"...

Jackson, I respectfully disagree with your assertion that:

"Artists don't think like businesspeople, and they don't want to - it's very much a mutually exclusive deal."

This strikes me as a glorification of the 1960's/70's idea of what a "rock star" does and doesn't really shed much light on the practical reality of being a professional artist in the 21st century.

To the contrary, artists are probably the most entrepreneurial people on the planet; they must conceive of, produce, judge, and tweak their product in the echo chamber of their own creativity.

Then, they have to sell it and market it. Themselves. (Whether this is to the "end-user" or an agent/label/manager)

If you are serious about being a professional musician, I believe that, on balance, it as just as easy/hard as it ever was; the label system provided a lot of opportunity in its heyday, at the expense of control. Now there is a far larger *volume* of opportunity, but it is more distributed.

I was having a conversation with a drummer this weekend who used to live in LA (where I currently live) and he was telling me about how he heard that the studio game in LA is going down the tubes.

Ummmm...

Well, the $100/hr places are going downhill, but in their stead there are dozens of private "home" studios staffed by the same people that get the same quality work done at a fraction of the cost.

THIS is the new reality of production. It's going to zero. It's just a fact. Yes, good equipment is still important, and ears. More people have these assets than ever before.

Can anyone convincingly argue that audio production quality will NOT continue to get better AND cheaper? (Answer: no)

Why is it every engineer/mastering engineer I know in LA has more work than ever?

On the flip side, since the production/distribution barriers are gone, more people than ever are making music. NON-COMMERCIALLY.

Here's some food for thought: Guitar Hero. And the fact that the music instrument/recording software business has DOUBLED in the last 10 years...to nearly $8 billion in annual revenues

Many people (including MANY "serious" musicians) hate this trend..."crappy recordings," "sub-par talent", etc.

I personally love it. The more people making music, the better. It's the most fun/best thing EVER!

The trend is entirely analogous to Larry Lessig's description of the explosion of consumer photography after Eastman invented easily-developable film. (In the first 50 pages of Free Culture).

(Business-y side note: A lot of value was created for a lot of people from that invention ;-)

Can anyone argue that lowering barriers to artistic self-expression through ANY medium is BAD for humanity? (Answer: no)

(disclosure: I am 27 and have been playing drums for over 15 years. I have an MFA in performance from the California Institute of the Arts, where I studied with jazz luminaries Joe LaBarbera and Charlie Haden. I have engineered many a recording session as well).

Posted by: Ethan Bauley | Jun 4, 2007 1:26:02 PM

A hint for the folks who are balking at the idea of "ad-supported music" for integrity/"artistic sensibility" issues:

Some sponsors are more acceptable than others...think

Apple v. Burger King

Gibson Guitars v. Wal-Mart

etc...

More examples:

1. New Wilco Album + Volkswagen
2. Elvis Costello/Diana Krall + Lexus
3. (It's not limited to cars)

Posted by: Ethan Bauley | Jun 4, 2007 1:35:04 PM

Ethan, respectfully, you are full of crap.

What do you create? Where's your studio?

Mine is in Greenpoint Brooklyn where I rent two rooms for 2,000 dollars a month to record local bands who shell out 40 bucks an hour, I AM the new model, and I can honestly tell you that the quality level is nowhere near the 100-300 per hour big rooms that are dying.

If bands have to pay for their recording, two things happen, first it takes forever to make a record because they all have to keep their day jobs in order to pay me. Second, they try to take advantage of Owner/Engineers like me by nickle and diming the whole process.

I know because I do.

What do you do?

Thought so.

"crappy recordings," "sub-par talent", etc.

Exactly.

Posted by: jackson | Jun 4, 2007 1:41:43 PM

Okay, so Ethan, are you saying that the musician gets to choose the sponsors? If so, then that makes it an endorsement.

Can you not see how forcing artists to endorse products and services so that they can earn money is pitiful at best and abusive at worst?

There are only so many advertisers in the world, now we are limiting the revenue stream to "acceptable" advertisers??

Exactly how many musicians are you hoping to support with this new model? Five?

And what about the advertisers? What about the pressures on them in your grand FREE THE MUSIC model? You don't think there will be groups out there who work to make sure this musician or that musician doesn't get a sponsor. You don't think Bill O'reilly will start pounding the table because of somebody's offensive lyrics?

How is a musician who has sold his sold to advertisers FREE???

Posted by: Dawn | Jun 4, 2007 1:52:41 PM

Two thoughts:

1. I've been in the entertainment industry for 17 years -- in film and television, but I've dabbled in the music industry, too. And the truth is, in all three areas there's an enormous amount of compaining and bitching by the studios/labels AND the "artists", but there has never been more opportunity to get your work out there and sampled by the public -- without having to convince some terrified studio/network/label bureaucrat first. Does this mean there'll be a lot more crap to wade through? Absolutely. But more crap to wade through means more opportunity for artists, and for group recommendation functions like Last.fm. Oh, and for tastemaker/opinionmaker people who become, essentially, brands themselves, like Nic Harcourt in LA on KCRW.

2. The new model for artists seems to be that they're responsible, first, for creating their own initial market. If you record a CD or make a short film that shows some traction, have a YouTube or MySpace or wherever following, do all of that tacky self-promotion that made egregiously unfunny Dane Cook such a successful comedian, then you may attract some great advertisers, or a major label may make you a deal, or a studio may offer you a one-year contract. I had a meeting last week with a young guy who made a really funny, clever short film, and is now trying to decide whether to take a studio development deal for television for so-so money, or to stay independent and entrepreneurial and rely on Adsense or whomever for a while, to give him more leverage later for a better studio offer. I wanted to make a deal with the guy, but I understood his perspective. He's trying to exploit both sides of the business, and he's right to. In the economic ecosystem that I work in -- and I agree that there are differences across the entertainment industry, but I'm not sure they're all non-trivial -- what we used to call studios and record labels are really now more like entertainment industry VCs.

Doesn't that sound great?

Posted by: Rob Long | Jun 4, 2007 2:39:22 PM

People who work within the music industry are as divided as anyone as to what the right model is (as the comments here also indicate).

I have many friends in the business, and most acknowledge that free is the future. It's not a matter of like, dislike, support or not. It's not up to them. It's actually up to their audience. And, the audience has pretty much spoken.

Distribution is a commodity. So the real question becomes, now what? Lots of opinions on the subject - including the music survival guide

http://www.futureofmusicbook.com/2007/01/music_survival_.html

In their words “offer something that piracy doesn’t”

Personally, I couldn’t agree more.

Posted by: Leigh | Jun 4, 2007 2:43:14 PM

"Does this mean there'll be a lot more crap to wade through?"

I don't think there's a soul who doesn't think the labels screwed up the "old" model by sheer greed at all levels and ripping off artists. Point accepted, but does that mean ALL aspects of the model were equally as bad? Absolutely NOT. They provided filtering first and foremost. They provided incubation for talent. They allowed talent to ply their art instead of working day jobs. While I think it’s great that anybody can get visibility these days For all the good reasons (more people buying instruments and recording gear), I also think it sucks in a major way. The real fact is that 95% are not, and will never be good enough to keep in rotation, let alone buy MP3/CD. I HATE wading through crap.

Despite all the great discussion about different ways to monetize music or making it free, I remain convinced that the last seven years or so have ruined it for those who make it and the real fans that used to consume it. Technologists are demanding things that they have no business even weighing in on. It reminds me of what happens to the guy who makes the greatest pizza in the world in his little corner shop. Some jack with MBA and a slick sales pitch convinces him to mass market his pizza and open franchises around the world. In five years time, the whole thing goes belly up, folks move on, and the dude can’t even sell pizzas in his original corner shop since he no longer has any credibility amongst the locals who used to patronize the place.

Don’t care if its advertiser supported or not, when it comes to music, it’s devalued when you give it away for free.

Posted by: Tony Alva | Jun 4, 2007 3:20:26 PM

@ jackson

Wow, you really are feeling the pain.

The studio business is a hard business to be in. Probably worse than the label business.

Before insinuating that I know nothing about what I'm writing about, I strongly suggest you visit my "record label," (and I use that term very lightly), where we are getting a new recording by [quite frankly] the MOST TALENTED BAND in Los Angeles off the ground.

(full distribution, a real site, etc is in the works...we just got the record out as soon as it was printed and cobbled this together)

The band is called Kneebody and the album is called "Low Electrical Worker."

There are a bunch of free tunes available on our site. I strongly suggest you check them out. You will really dig it...Bad Plus/Medeski/Weather Report but more rocking and psychedelic.

Here's a bit of a recent review from NYC's own All About Jazz:

"A heady blend of aggressive rock music conventions, gorgeously baroque pop melodies, virtuosic jazz improvisation and intricate compositional smarts, Kneebody forges headlong into the future. Low Electrical Worker is an ideal balance between popular music and jazz improvisation, fusion in the most perfect sense of the term."

Total recording cost for LEW: $0
Total Mastering cost: >$1k
Total overhead cost for [forthcoming] distribution via iTunes, eMusic, Rhapsody, Napster, Amazon: >$50

The studios that I have worked in have been all over the map...mostly high-grade home studios from North Carolina to the San Fernando Valley. But also including Capitol Studios on Vine in Hollywood (Sinatra, et al).

I agree that your studio doesn't sound as good as Capitol. But the gap is an order of magnitude smaller than it was in 1999.

My only point is that this gap is going to continue to close.

In my experience, being completely self-produced (as in, fold the engineering function into the band itself) is by far the best way to go, and I can see more and more peeps going this way. As you well know, recording music is almost as fun as playing it. I think this model will only gain more and more traction.

You have many more hours than me engineering records, I'm sure, but my experience is by no means trivial.

I'm not saying I have all the answers but I believe the trends I've outlined here are unavoidable.

Posted by: Ethan Bauley | Jun 4, 2007 3:22:01 PM

@ Dawn

Who is "forcing" artists to endorse products and services?

My general position on the endorsement/sponsorship gig is that it's only a small slice of the pie. And being that the creators are gaining more and more control over their output, I'm imagining that they would also control whether or not they say "yes" to an endorsement deal.

I am also talking about venues accepting sponsorships, labels themselves, maybe niche-oriented editorial, etc.

When these connections do occur, I would also imagine that they could be quite potent.

Except in special situations, I can't imagine direct sponsorships accounting for an average of more than 5-10% of an artist's revenue. But that's a good bit more than none...or the label scooping it up without sharing revenue (as has been the case under the standard recording contract).

Many ad agencies are already working hard on getting some direct sponsorship deals like this done. I wouldn't say it's inevitable, but there is some inertia at work.

Posted by: Ethan Bauley | Jun 4, 2007 3:48:34 PM

let me try to simplify my point: when the "free" model takes over (and I agree, it will, how can it be otherwise?) what will protect the artists and inventors and entrepreneurs rights?

copyrights and patents and yes, DRM systems, were all invented explicitly for this puropose

the "free" model seems to need to do away with these protections (at least as far as i can tell).

fred, do you agree? can you point me at new media publishers/distributors of free content who share ad revenues with creative artists? to my knowledge, myspace does not share revenue with its users. last.fm and pandora are desperately fighting artist royalties (admittedly the royalty rates are untenable.) nytimes has not increased writers salaries based on nytimes.com revenues or "times select." digg does not pay its hardcore diggers. second life does not pay its hardcore residents. flickr (et. al.) does not pay its image uploaders. google does not pay wikipedia. youtube says its is going to share ad revenue but (for a company that otherwise innovates at light speed) takes forever to roll out a program and when it does, only does so for a tiny group of content producers and only under severely limiting conditions.

and being in the hardware/software business, of course apple inc is against DRM -- the more free content out there, the more utility there is for iPods etc. iTunes makes zero profits for apple because those pesky artists need to be paid. so all platform operators -- comcast, verizon, newscorp, google, et al -- will also push for DRM to be abolished, as it will reduce their cost of content without making their platforms any less valuable

and in the old-school "free" ad-supported models like broadcast TV, the publisher/distributor (e.g. the networks) wanted total control of the platform and so assumed responsibility for content development -- and pre-negotiated with creative artists to produce content and share in revenues. maybe that will happen on the web. maybe.

one last note: clearly the entire advertising world is shifting online etc. but the current reality is a little different than we often believe: the IAB reports 2006 internet ad revenues of $17BN. Google and Yahoo's combined 2006 revenues were $16BN ($10.6BN plus $6.4BN respectively). Google is 100% paid search CPC. Yahoo discloses their revenues are 90% paid serach CPC. It is far from clear that paid search CPC somehow maps onto music and video. I'd guess it doesn't, and that ad revnues for music services will have to be from demographic targeted brand advertising, which will come but -- given the users adversion to traditional units like the invasive 30 second spot -- may take a lot longer than anyone thinks.

again, i heartily embrace the shift to new models (and in any case believe it is inevitable) but i hope we can figure out how to amply reward creativity, innovation, invention and talent, and not just view creative types as "users" who should be happy just to have access to the (huge conglomerate owned) networks.

Posted by: Steve Kane | Jun 4, 2007 4:00:32 PM

The main thing I want to clarify in regard to both points I've made on this thread is that the people who actually write the music/"content" we are talking about make a living through many revenue streams.

It's not just recordings (selling them or making them).

It's not just advertising.

It's not just merch.

It's not just touring.

It's not just licensing.

It's not just publishing.

And so on. Each of the stakeholders in each of these areas, who don't see the full picture, are screaming bloody murder, because their pie is changing (or getting smaller).

However, I believe that, as this transition continues, the real beneficiaries will continue to be the people who create and "own" the art/content we are all so concerned about.

These are the ONLY stakeholders with access to ALL of the above mentioned streams (except for mangers...ding ding ding!)

This is doubly true for those that can wear a few hats (i.e. guitarist/manager, engineer/composer, etc).

For the record, I also agree with everything in Fred's original post.

I think that mobile, streamed music (of only music that is good...no crap music ;-) is pretty much the holy grail.

Last.fm artist radio is pretty amazing.

Peace

Ethan

Posted by: Ethan Bauley | Jun 4, 2007 4:02:59 PM

Ethan, while I rescind the more biting and insulting portions of my comment, I still could not disagree more re:

"In my experience, being completely self-produced (as in, fold the engineering function into the band itself) is by far the best way to go, and I can see more and more peeps going this way. As you well know, recording music is almost as fun as playing it. I think this model will only gain more and more traction."

Except the fun part.

Nobody should produce themselves.

Okay, maybe Prince.

How do you record at no cost? What kind of deals are you working?

Why have you paid 1,000 dollars for mastering?

That seems excessive considering....

At any rate, good luck. I wish every musician, engineer, and producer (there are exceptions there) the best, keep fighting the good fight. Songs over production, production over marketing.

Above all, do it for the love of it - whatever it is you do.

Posted by: jackson | Jun 4, 2007 4:23:38 PM

@ jackson

Cool man, yeah the mastering thing is just a guess, I didn't have anything to do with it. If you email me your address I'll send you a copy of the CD...there is NO limiting on the mastering job, and it sounds huge!

Being self-produced I think is just going to be a necessity/reality. I absolutely agree that outside ears are vitally important.

A growing majority of the bands/artists I am in contact with are self-produced (i.e. someone in the band is an engineer). This is a couple dozen acts all over the country at a wide variety of levels of success.

The sound is pretty awesome. The music is absolutely AMAZING (lots of catchy pop).

My business isn't really record label-oriented in the conventional sense anymore.

Also, Kneebody is playing a couple of shows in Williamsburg June 6 and 7, if you have some time you should check it. I think the shows will be free, but invite only (kind of a bizarre situation with a non-commercial, private venue). Let me know if you're interested.

Anyways, yeah, I hope everyone has the good fortune to be motivated to work by love, by passion. Many many sacrifices, but overall: Best thing ever.

;-)

Posted by: Ethan Bauley | Jun 4, 2007 4:53:16 PM

Music being free seems to be the road we are headed.

Thanks to the "all content should be free" technorati's Vulcan death grip on the press through blogs the perceived value of music is racing to zero. It's already there for people under 25. There is a disturbing lack of respect for recorded music and content in general. It's almost as if people don't value the process at all.

Do you have any idea how many unique visitors it would take to visit a site/stream in order to replace the income from record sales for your average indie band?

Waaay more than that band would ever get. Sure, the mega acts would get enough to keep them eating well, but the developing bands would starve. Not only that, they wouldn't have the money to market and promote.

I'm 32. I've A&R'd, produced, promoted &/or executive produced several platinum selling and indie projects over 16 years. For the past 7 years I've been on the cutting edge of the digital revolution as well. I see where it's going and it's not a pretty picture for acts without serious money behind them.

Jackson was 100% correct when he said business skill and artistic skill are mutually exclusive. If you have one you generally don't have the other. After dealing with literally thousands of artistic types of every level I have found this to be true in 99% of the cases. So if the model changes and becomes more scientific, as an ad supported model would, most great artists will be left in the cold trying to figure out how to eat.

Be careful what you wish for Fred. I know you are a music lover. If you want to see those wonderful indie acts you find weekly start being harder to find then keep encouraging an ad supported music business. It's unfortunately going to happen, but don't wish for it to happen before it's time.

Posted by: P. Biddy | Jun 4, 2007 10:20:33 PM

Hi Fred,

I think the key stumbling block you're running into from people is the same one I hit in my series of posts on economics of content: the use of the word "free." People are quite confused. When you say free, they seem to think that it means that they're giving something away of value for no money, and that's a "lost" sale.

That's wrong.

The use of "free" is the same thing as an advertisement. It is a promotion for selling something else.

And, once you realize that, the business models start to become clearer. I disagree with you, by the way, on the claim that music will become "ad supported." That's a historical view of advertisements. In this case the music *IS* the advertisement. Advertisements and content start to blend together.

Since the music can be infinitely copied, it's what you use for promotions. But what is it promoting? Anything related to the music that is scarce. That includes all sorts of things: attention, access, concert tickets, t-shirts, albums, the creation of new songs. All of those things can be bought.

So, again, I point back to the business model I suggested four years ago, where the musicians use the music as a free promotion (in which case they *want* it to be available everywhere in the easiest way possible) and then use that to sell *access* in the form of a fan club.

http://www.techdirt.com/articles/20030912/1032238.shtml

What does that fan club mean? Well, you pay, say, $20/year (about the cost of a CD) and you get access to private mailing lists or bulletin boards. You get the first chance to buy tickets for shows. Or you get access to "fan club only" member shows. Or you get to enter a raffle to have the band play in your backyard. Or anything like that. Or it need not have anything to do with live shows at all. Maybe it's a chance to have the band write a song about you, or dedicate a song to you.

There are lots of ways this works. Sure, there will still be a ton of people who will get the music and never pay a dime, but the ability to then spread that music further, finding more people willing to pay for those scarce things, the bigger and bigger the potential becomes -- and it has nothing to do with annoying fans with advertising.

The music is the advertising. It's not about "free." Free confuses people. It's about recognizing what's promotional and what's for sale.

As for the naysayers, they can stick with their old business model as long as they want. In the end, they'll discover it's unsustainable and those who adopted the new business model are doing much better.

For more on this:

http://www.techdirt.com/articles/20070503/012939.shtml

Posted by: Mike Masnick | Jun 4, 2007 10:51:09 PM

To really comment on this you have to know where bands make the bulk of their money and more importantly WHEN they make it in the bands life cycle.

Knowing those facts lets you know what makes sense for which bands. Not all acts are created equal. Rock, Urban, Pop, Country... you have to understand that each of the different genres makes it's money differently. The fans don't buy the same things at the same time in the act's development. Touring & Merch are all we are talking about here since music will seemingly be free for all by 2010.

Rock sells a decent amount of merch and tours constantly for profit at earlier stages than pop, urban and country so they can survive on scraps much longer.

Urban and pop acts sell very little merchandise until they are mega artists. They also do free shows in the beginning until they have certified hits on the radio. Do you know how much money it costs in marketing to get to that point? Loads.

The economics of an ad supported "free" model doesn't work the same for everyone. It would barely cover the early stage promo costs for rock bands. It would be quite harmful to indie Urban, Gospel and some country acts.

It would work for a select few but that is not a good thing for music in general. Labels may have had a lot of faults but the ability to give lots of acts a GOOD shot to be heard was something that will go away and be missed in the future.

That's not to say this model we are speaking of won't come to pass, because it surely will, but the question becomes how to do it without killing the art. The art IS in danger here.

Posted by: Ahmet Motolla | Jun 4, 2007 11:45:07 PM

I'm late to the debate - so I'll skirt around the edges. Anyone remember Sigue Sigue Sputnik?

http://en.wikipedia.org/wiki/Sigue_Sigue_Sputnik

They sold "advertising space between the tracks on their first album Flaunt It (released in 1986)...including spots for i-D Magazine and Studio Line from L'Oreal."

They certainly straddled the line between "art" and "business". In fact, business _was_ their art.

However, at the end of the day, SSS sounded like a mess, and they quickly fizzled out. Conclusion: money, from what ever channel, will end up rallying around quality "art" (define that how you like) - which has got to be a good thing.

Posted by: tobias | Jun 5, 2007 11:35:37 AM

Mike wrote:

So, again, I point back to the business model I suggested four years ago, where the musicians use the music as a free promotion (in which case they *want* it to be available everywhere in the easiest way possible) and then use that to sell *access* in the form of a fan club.

Mike, don't you think it's a tad arrogant to for you to tell other people what their business models are?

Artists are welcome to give music away for free if they wish, many do, I agree it's a very solid model for some subset of musical artists. That model totally doesn't work for others (not a lot of classical and jazz t-shirts sold). However, the decision to give it away should be theirs, not ours. If an artist chooses on their own not to give music away as a promotion, that choice of theirs should be respected.

Posted by: Erik Schwartz | Jun 5, 2007 1:09:57 PM

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