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March 26, 2007

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Frederik Marain

I refer to my comment on Chris’ earlier ‘Give away the music and sell the show’-post.
Economic theory (and psychology) predicts that people, when able to share a resource without being forced to pay for it, will take this free ride.
The free rider problem in Economics is the question of how to prevent free riding from taking place, or at least limit its negative effects (e.g. by taxes).
Yet, street musicians and other good street artists can make lots of money. One can frequently observe street shows where at the end almost everybody in the crowd gives money. What's more: the better the show, the more people give. For economists, this is highly irrational behavior.
Peter DiCola elaborates on this ‘irrational’ behavior in his article ‘The Online Tip Jar Experiment: Why the Results Could be Underwhelming - Or Even Harmful - For Artists’.
While I share Peter’s belief that Online Tip Jars will never work, I am not satisfied with his attempt at explaining the economic anomaly of tipping a musician.
Peter states that ‘…the incentive we would have to tip musicians is to provide the ability and the incentive to produce music in the future. It is not reward or remuneration for past production. This would make no sense - why pay later for music you have already heard?’
In my view, the anomaly is still there. I know it doesn’t rationally make sense to pay later for music I have already heard, but I (and many others) still feel compelled to pay, and pay more if the show was very good, even when I am sure that I will never see the show or the artists again.
So, ‘Give away the music and sell the show’ is only part of a possible new business model. I feel that a sound new business model for music should somehow be able to take into account the anomaly of ‘tipping post factum’.

Ben Tanen

I figured I would link to some of my "old school" (literally) ramblings on this topic -- from 1995. Chris, I agree with you whole-heartedly about the way the world is moving, and that the DMCA wasn't just wrong...but exquisitely, precisely, 180-degrees wrong.

It brings to mind Justice Holmes:

' ' It cannot be helped, it is as it should be, that the law is behind the times. I told a labor leader once that what they asked was favor, and if a decision was against them they called it wicked. The same might be said of their opponents. It means that the law is growing. As law embodies beliefs that have triumphed in the battle of ideas and then have translated themselves into action, while there still is doubt, while opposite convictions still keep a battle front against each other, the time for law has not come; the notion destined to prevail is not yet entitled to the field. It is a misfortune if a judge...forgets that what seem to him to be first principles are believed by half his fellow men to be wrong. ' '

Josh Bernoff

In 2000 (!) my Forrester colleague Eric Scheirer (graduate of the MIT Media Lab) argued that something like "Give away the music and sell the show" would come to pass. He wrote a report called "Content out of Control" which is still on our Web site here:

http://www.forrester.com/ER/Research/Report/0,1338,10020,FF.html

I edited that report and I said he had gone too far. When I took over the music coverage from him (he's now at Bose), I said that digital downloads would end up paying for the decrease in sales of CDs. After all, predicting the end of the CD business in 2000 was pretty audacious.

I was wrong, he was right. When Steve Jobs calls for an end to DRM, the industry has fundamentally changed.

Interestingly, the vast majority of musicians make more money from touring than from records anyway.

Ben

Hey Chris - partly related to your post, but not fully. If you didn't see it, CNN.com has an interesting article on the band Nickelback and how they're very successful despite critics never liking them. Sounds like exactly the kind of example you would use. fwiw. Never doubt the intelligence of the crowd, always question the intelligence of the limited "experts."

Link is: http://www.cnn.com/2007/SHOWBIZ/Music/03/26/music.nickelback.ap/index.html

Bill Aicher

Chris - here's some news that falls in line with what you're discussing in your post. Musicnotes just announced today that they are planning on bringing back a popular Guitar Tab web site as an advertising supported model, free to consumers - but with licensing from music publishers.

Link is:
http://www.mxtabs.net

James Dueck

In the post-copyright era, music becomes a custom service. Not a service like Pandora, which is really a re-packaging of the 20th century definition of music. I'm talking about a service like TailoredMusic.com. Songs will be shared experiences among networks of friends. Occasionally a piece of music will transcend the network and become a pop phenomenon.

This is exactly what happened with Open Source software. A useful python script is like the custom song enjoyed among friends. The Apache project is like the pop phenomenon that transcended above the normal part (i.e. the long tail) of the system.

Chrissy

There is an incredible company that will take digital media to new heights in profit: http://www.9thxchange.com. The 9thxchange marketplace is the newest way to bring together buyers and sellers of digital content. The service dramatically reduces content piracy by offering the seller lifetime royalties-even on exchange between consumers. Moreover, the service accommodates all technology platforms, file types and creators. The 9thexchange and its CEO John Bonaccorso have been fully featured in Crains Detroit AGAIN.

Eben Carlson

Ouch.

I can only guess that there aren't any musicians around.

Give away the music to promote a show?

That's a horrible idea.

My issue with long tail stuff is that it's essentially a way to make money off of existant, aging goods and doesn't address how to create more (and more beautiful) faces. In this way it's anti-creativity and pro-business.

In a condition of true abundance, the solution is pro-creativity and pro-business. First, because it's not a zero-sum equation and second, because creativity is what's driving our current growth. Assuming we enjoy it, and the prosperity it brings, why on earth wouldn't we reward it?

It's our fear of money--premium priced content specifically--that stifles the real, honest, mature, and warm artifacts we crave in our mass culture. Why make them when it alienates the 18-34 year olds who pay your rent?

Would we be better off if Starbucks gave away coffee to sell cream and sugar?

If you like burnt 7-11 coffee in Styrofoam cups perhaps.

Having artists make money off of secondary pursuits puts culture at a distinct competitive disadvantage. Somewhat like breaking a finger for each song a pianist writes.

Better TVs, better movie theaters, better popcorn, more elaborate stage shows, bigger tour buses, more concert T-shirt designs to choose from and more infantile, more boring, more "extreme" songs, movies and tv shows is the result of lowering content prices. (Or allowing inflation to lower them relative to other goods and services). This we can clearly understand from our own experience.

Today's prices dictate tomorrow's quality. Even with millions of artists subsidizing their own production--and billions in government and non-profit subsidies--we haven't seen an increase in quality in most mediums since the late 70s.

(Where we have seen advances they have usually come at the expense of production values and with the additional cost of more extreme and divisive content. It is also worth noting that we lose our best artists at an incredible rate. To call it burnout would be to trivialize it, but it's an interesting question to ask how such a notoriously happy-go-lucky and lackadaisical bunch seems to self-destruct upon entering the economy--ostensibly on their own terms.)

There are thoughts that take ten years to think. And there are unlimited numbers of songs, books, tv shows and movies that take longer to deliver than our current economy allows. Love, kindness, clarity and most other sophisticated attributes are simply beyond our current lowest common denominator.

Making artists sell shows to make music is like making scientists sell pies to do research. They may or may not enjoy baking, but it's wasteful, inefficient and humiliating enough to discourage the best and brightest.

It goes without saying that any industry or institution that treated its best minds that way would not be long for this world.

If we want a culture--values--as rich and mature as our material goods, we have to pay going rates. If we want an educated, relaxed, mature, loving, deep, fun and enlightened culture, it will cost significantly more than a depressed, violent, escapist, shallow, hateful, confused one. It's no different than hiring a nanny.

Being influenced by money is distinct from being dependent upon it. Culture is not dependent upon financial reward--folks are going to sing regardless--but it certainly is influenced by. To deny ourselves the ability to reward songs we love more than songs we like just ensures that we'll get more of whatever is easier to produce. That's an economic certainty.

Where the market has been allowed to work freely, choice and quality have flourished. We have hundreds of premium blue jeans to choose from. $50,000 mattress sets, $120 vodkas, and $10 million dollar space tourism excursions. People pay $200,000 a pop for four minutes of weightlessness.

Look at it this way: we have more and more sophisticated, mature and well-rounded individuals and an increasingly stunted, juvenile and divisive culture. How could the problem not be systematic?

Fixed pricing for content can't hold on for long. It's taking hits from every side. If nothing else, once digital delivery does to network television, movie studios and publishing houses what it's currently doing to the music industry, premium pricing will become so appealing to artists--simply as a means of differentiation--that it'll get used just to get inferior artists noticed. It happens in every industry.

Put more interestingly, the richest people have the least time and energy for the 85 me-singing-in-the-bathroom Youtube videos it takes to find four minutes of actual fun. And as our Youtubes and Myspaces multiply, this understanding becomes more and more valuable.

So just like we pay Nordstrom, Saks and Barneys (and Wal-Mart and Target and the Gap) to assemble clothes we might like at a certain price point, we'll pay artists and labels to assemble content we might like at a certain price point.

The .$99 song market is saturated, as is the $14.95 book, and $34.99 DVD market. There will likely be growth in the free song market, but it's a mistake to think that it will be anything very new, exciting or profitable. The people have spoken and even Wal-Mart is trying to move up-market. Our culture may not have led (this time) but it will definitely follow.

The first example of this premium mass culture is already available. It's a book called The Love Artist. A paperback selling for $120.

How do I know?

I wrote it.

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Refreshing to hear this sort of talk from an industry who only recently was up in arms because Prince made the decision to give his new album away in the British papers. I have long thought that the “sell the show” model work well, but recently I’ve begun to wonder if the real solution necessitates slimming down the industry itself, specifically by doing away with the bulk of most record companies. In terms of distribution, they simply aren’t necessary (certainly not at the percentage they take from most artists). Internet downloads don’t require any kind of overhead, and an artist can usually post songs himself. Marketing is still important, I suppose, but there are so many bands out there who don’t really get any kind of serious marketing who still find ways to succeed. Why not cut through all of the garbage and let artists take their careers into their own hands, as many coming up (or older artists like Prince) are already beginning to do? They promote themselves, they post their music, and they reap all the rewards or themselves.

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I liked your piece very much. This experiment is thought-provoking and has been tried very seriously in a strange country called India. What is misunderstood as the caste system today was designed so as to create two economies. The abundance economy was in fact the morally superior one, and those participating in it were the teachers of society, who were to only survive through service and the goodwill of others. They were to develop fearlessness in the pursuit of truth, and have the courage to standup to economic and military might with just the courage of their conviction.

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

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