I did a quick 30 minute open house in the Berkleemusic studios a couple of weeks back. We talked about free music, radio, distribution and retail, setting up your website, and some other things. Take a look here:
I recommend you watch this outstanding presentation from Techdirt’s Michael Masnick on Trent Reznor’s online marketing techniques.
Key points: engage your fans directly, provide variable products and pricing (including a hi-end deluxe package), use free music as a way to collect fan email addresses, and create an ongoing connection with your fans both online and offline.
Also check out the great ways (via YouTube, Flickr, and fan remixes) that Trent is working to get his fans to interact directly with him via his Web site, and his innovative usage of BitTorrent technology.
Some good examples of bands that have NOT had major label support in the past using these same techniques as well.
“Talking gross numbers that come directly to the band, we have made more money already than we have on the last record in four years,” said Mathieu Drouin, the band’s co-manager.
Great piece in the L.A. Times today on Metric. The band is forgoing a traditional record deal and focusing on alternative income sources and direct to fan sales and marketing techniques for their most recent release “Fantasties.” Direct to fan has been a proven model for megastars like Radiohead and Trent Reznor, and it’s encouraging to see a “middle class” musician (Metric’s 2005 release “Live It Out,” sold 45,000 copies) having success using a similar template.
Some takeaways from the effort:
1) Without the distribution fee and record royalties that a major label and distributor would charge, Metric is able to net $.77 per iTunes track as opposed to something closer to the $.22 per track a label would pay (this figure includes international downloads, which could pay the artist more than the US standard of $.70 per track by going direct)
2) As distribution follows marketing, Metric has hooked up with Topspin to handle the online direct to fan marketing and sales efforts. Take a look at their Website, here. Fantastic way to leverage “free” to acquire names for the mailing list, they have an active blog area, and most importantly, they are engaging in variable product and pricing which everyone from the hard core fan to the curious potential fan can engage in. Again, because the band is selling direct, their profit margin is much higher. Metric sold out of an initial allotment of 500 deluxe packages in 48 hours, said Drouin, who estimated a profit of $13 to $15 per unit. “We can never offer a fan that much value at that price if we had to go through a record company, distributor and a retailer. We cut out three rungs.”
3) The band made the entire record available for free as a stream a month before release, creating widgets that could be embedded in fans Websites (provided by Topspin). Folks were able to become familiar with the new record, they liked what they heard, and they paid for the record when it was released commercially. This is the “emotional connection” theory in action.
4) The band worked with independent distributor Redeye for the physical CD. Because Metric has a track record and had analytics that proved people were into the record, Redeye had an easier time shipping the record to physical independent record stores.
5) Canada supports the arts. The Foundation to Assist Canadian Talent on Recordings provided the band with $50,000 to cover recording costs, as well as a smaller federal grant.
Major labels are traditionally known for A) financing, B) marketing, C) distribution. I think Metric is a great example of a band that not only accomplishing all of these things outside of the traditional model, but is making more money because of it. Check out a cool Elliott Smith cover by the band:
It’s not all that surprising to read that some folks are making a killing from building apps for the iPhone. As of January ’09, over 500 million apps have been downloaded, and seeing that Apple takes a 30% cut on all apps (same as their fee for sales of music on iTunes), developers are taking in 70% of the revenue of these 500 million downloads. What IS interesting to me is the marketing behind these apps, and in particular, the way that some developers are using the concept of free to generate interest in their product.
The New York Times ran an article last week on Ethan Nicholas, the guy who built iShoot, an app that has generated $800,000 in sales in five months. Take a look at how his sales progressed:
“After the project was finished, Mr. Nicholas sent it to Apple for approval, quickly granted, and iShoot was released into the online Apple store on Oct. 19.
When he checked his account with Apple to see how many copies the game had sold, Mr. Nicholas’s jaw dropped: On its first day, iShoot sold enough copies at $4.99 each to net him $1,000. He and Nicole were practically “dancing in the street,” he said.
The second day, his portion of the day’s sales was about $2,000.
On the third day, the figure slid down to $50, where it hovered for the next several weeks. “That’s nothing to sneeze at, but I wondered if we could do better,” Mr. Nicholas said.
In January, he released a free version of the game with fewer features, hoping to spark sales of the paid version. It worked: iShoot Lite has been downloaded more than 2 million times, and many people have upgraded to the paid version, which now costs $2.99. On its peak day — Jan. 11 — iShoot sold nearly 17,000 copies, which meant a $35,000 day’s take for Mr. Nicholas.”
Obviously, this is an extreme example of what can happen financially for app developers, but I do think that some comparisons can be made to musicians looking to generate interest in their music online. My friend John Snyder, who runs Artists House Music, once told me “the curse of the developing artist is anonymity, not piracy.” I do believe that some form of “free” makes sense for most artists; be it a download card distributed at live shows, select music available for free on your site (perhaps in exchange for an email address), live shows for download, etc.
Traditional one-size-fits-all physical retailers are failing – Virgin, Transworld, and Borders have all either closed up shop in the US, drastically cut back on music floor space, or are taking massive financial hits. I think a large part of the future of sales in the music business is online direct to fan relationships (with supporting offline components), where artists cultivate more extensive relationships with their fans, and in the process more effectively monetize traditional and non-traditional sales options. I think some part of “free” works to engage your existing fanbase, as well as turn casual fans into hard-core supporters.
Andrew Dubber has some good thoughts on the topic of free as well. Take a look at his post on “Why Give Away Music For Free.”
It’s been widely reported that Touch and Go, a seminal independent record label (as well as a distributor of other fantastic indie labels), is cutting back its label operations and discontinuing its manufacturing and distribution operations completely. Here’s the message from Touch and Go’s Corey Rusk:
It is with great sadness that we are reporting some major changes here at Touch and Go Records. Many of you may not be aware, but for nearly 2 decades, Touch and Go has provided manufacturing and distribution services for a select yet diverse group of other important independent record labels. Titles from these other labels populate the shelves of our warehouse alongside the titles on our own two labels, Touch and Go Records, and Quarterstick Records.
Unfortunately, as much as we love all of these labels, the current state of the economy has reached the point where we can no longer afford to continue this lesser known, yet important part of Touch and Go’s operations. Over the years, these labels have become part of our family, and it pains us to see them go. We wish them all the very best and we will be doing everything we can to help make the transition as easy as possible.
Touch and Go will be returning to its roots and focusing solely on being an independent record label. We’ll be busy for a few months working closely with the departing labels and scaling our company to an appropriate smaller size after their departure. It is the end of a grand chapter in Touch and Go’s history, but we also know that good things can come from new beginnings.
It’s sad to see a label so artist friendly (the handshake deals that Touch and Go does with bands pays them 50 percent of the net profit on their records–about four times the industry’s standard royalty rate) in this situation. Physical distribution is a tough business (as is physical retail), and as Rusk mentions in the last sentence of his note, good things can come from new beginnings. Innovative thinkers (like Terry McBride from Nettwerk) are forging a new direction with music companies that are based less on the reliance of income generated from distribution and sales of physical product. I hope Corey Rusk can do the same with Touch and Go.
There’s been a lot of attention on Guitar Player and Rock Band as promotional outlets and revenue sources for (mostly established) bands. But hearing “Don’t Stop Believin’” on Sirus/XM’s “80s on 8” this past weekend on Jet Blue made me remember that bands scoring placements in video games goes WAY back.
Does anyone else remember the Journey Escape game for the Atari 2600?
The premise of the game:
You must lead all 5 members of Journey through waves of pesky characters and backstage obstacles to the Scarab Escape Vehicle before time runs out. You must also protect $50,000 in concert cash from grasping groupies, photographers, and promoters.
All Journey Band Members – drummer Steve Smith, keyboard player Jonathan Cain, bass player Ross Valory, lead guitarist Neal Schon, and lead singer Steve Perry, are counting on you to lead them to their escape vehicle. It won’t be easy. As Journey says, “Some will win, some will lose…”
The point structure was equally awesome:
At the start of the game, you will have $50,000 and 60 units of time. Each time you get stopped by a groupie, photographer or promoter you will lose some of your money. For example, contacting a groupie will result in a loss of $300, a photographer $600 and a promoter $2,000. Each time you contact a Manager, you will gain a bonus of $9,900.
If you make it to your escape vehicle before your time runs out, any extra time will be applied to the next band member. If you manage to get all five band members into the escape vehicle with time to spare, the extra time will be converted to a bonus of $100 for each unit of time saved.
I must have heard “Don’t Stop Believin’” 1000 times while playing this game. Perhaps this is one of the reasons that the song is the best selling catalog track in iTunes history, with 2 million copies sold to date?
Witness the magic:
Music Ally has posted their thoughts on the best online promotions from October 2008. I was familiar with many of these (the AC/DC video in Excel being my favorite), but there’s some other really creative ideas in here worth looking into. Great iPhone app ideas from Snow Patrol, NIN and Pink, and a cool online distribution idea from Ben Folds that leverages iTunes and his live music.
Also: if you are not part of the Twitter train yet, I suggest you give it a look. Microblogging is another great marketing tool that should be considered as part of your overall community-building plan. Even Britney Spears is on board!
I’ve talked at length about the fact that it’s certainly easier (and cheaper!) than ever to sell your music online using CD Baby or TuneCore as a digital distributor. And while I think it makes all the sense in the world to get your music out to iTunes, AmazonMP3, and the other online retailers, it’s also important to sell directly to the fans that are visiting your own site or blog. Selling from your own site not only provides you with the opportunity for a higher percentage of income than selling through a third party site, but it also affords you the ability to creatively price your music, offer higher quality FLAC or lossless files, put songs up for a limited period of time, or engage in other subscription pricing models (like what Ari Hest is doing) that is not easily possible with third party online retailers.
Where do you sign up, right? Well, that’s the catch. The process of setting up an e-commerce store on your site is not necessarily the most straightforward thing to do. Andrew Dubber, whom I first heard about when he published his free e-book 20 Things You Music Know About Music Online, has a great post on his blog outlining his research on selling music online. He outlines several options from straight up outsourcing it (easiest option of course, but also most expensive), to open-source e-commerce platforms and plug-ins (the most interesting being this free WordPress plug in).
Check out Dubber’s complete post here.
Well, there’s certainly no shortage of news from the major labels lately. Following recent announcements from Warner (who are presenting a vague idea to charge people a flat fee for all the music they care to download from peer-to-peer sites), and Sony/BMG (who’s head, Rolf Schmidt-Holtz, revealed that he supports the idea of a DRM-free unlimited music service), The New York Times today reported that three of the four major labels (EMI is rumored to join soon) have struck a deal with MySpace to launch “MySpace Music.” The deal will be set up as a joint venture, where the labels will receive an equity stake, and MySpace will control and operate the organization. Reuters news service claims the service could launch in days.
Some interesting points:
• The major’s entire catalogs would be available.
• The labels will stream their music for free, and be paid through advertising dollars (MySpace apparently makes $70 million a month in advertising revenue currently).
• Tracks will be available for download DRM-free, so they can play on any MP3 player.
• The labels will also use the outlet to sell artist’s merch, ringtones, and tickets (which, thanks to the 360 deals the majors are going for now, will provide additional revenue streams for them).
• There is also a possibility of a subscription-based component that would allow users to pay a monthly amount for unlimited downloads (likely through subscription DRM).
It looks to be a real win-win situation for the labels (as well as consumers), apparently made possible through Universal settling their 2006 lawsuit against MySpace for roughly $100 million (which is rumored to be part of the deal).
The only wild card is if folks can be convinced to actually purchase music through MySpace. Shawn Fanning’s Snocap, which folks can currently use to create an online store on MySpace, has not been popular (check out what Derek Sivers, CEO of CD Baby, said about their past arrangement here).
I’ve talked a lot about how TuneCore and CD Baby are great online distribution options for independent bands. The two are set up differently, with CD Baby taking 9% of sales, and TuneCore making money on a $19.98 annual fee plus $.99 per store per record upfront costs. We run the numbers in my course on which is the better option for online distribution, and at low sales, there is very little difference between the two services. But at higher sales figures, there’s quite a bit of difference.
Eliot Van Buskirk at Wired’s great music blog just wrote a quick piece on what Trent Reznor likely paid to distribute his new record, ‘Ghosts I-V’ to Amazon. It’s really pretty amazing:
“Trent Reznor found a great deal for distributing his comprehensive new Nine Inch Nails album to the Amazon MP3 store: going through TuneCore, while keeping ownership of the master recordings and 100 percent of royalties. Now we can see why he was so eager to leave his record label.
This is assuming TuneCore charged Reznor its standard for delivering a 36-song album on the Amazon MP3 store for the first year; I have a question in with TuneCore to try to confirm:
$35.64 ($0.99 per track)
$0.99 to put one album in one online music store
$19.98 charge per album
$56.61: Total cost to distribute Ghosts I-V to Amazon MP3
That’s not the only efficient aspect of Reznor’s plan. He’s using BitTorrent to distribute the first 8-song volume of the album to fans for free, and the innovative aspect of the release generated lots of (deserved) press attention.”
Trent is using a Creative Commons license with this current release, which I also think is noteworthy