Archive | April 2012

Free Digital For Paid Physical

Over the last fifteen years, music as a consumable good has advanced through various phases of accessibility and transaction values. At the beginning of the web’s tumultuous relationship with recorded music, we witnessed file sharing sites such as Napster and Kazaa that allowed users worldwide to illegally share digital content amongst themselves. I’ll label this early internet piracy/anarchy phase one. The development of credible digital music retailers such as Apple (iTunes) marks phase two, the rise of true internet revenue channels for music. Anti-piracy efforts shut down the first generation of offenders but new services such as BitTorrent and Megaupload stepped onto the scene in phase three, the resurgence of a more robust piracy. As a result of these powerful torrenting and file sharing sites, I would argue that selling digital music (in terms of direct sales of songs to fans) will become unfeasible within the next five years.

We are, therefore, on the cusp of phase four, the pursuit of alternative means towards monetizing digital music content. To be fair, digital music sales continue to be profitable, at least through the major retailers like iTunes and Amazon. Services like TuneCore also enable more musicians than ever to expose their music products to a broad consumer audience, and that has also contributed to a rise in digital sales. I think revenue from these existing commercial channels will continue to grow for years to come, but at diminishing rates. Piracy has been steadily increasing, and I believe that potential revenue lost through piracy will become even more staggering. In any event, we are on a trajectory away from the direct monetization of digital tracks, which I think we will reach in the not-to-distant future.

Even today, the main challenge for artists is that their music can often be freely obtained, and little to no incentive exists for consumers to spend money to buy a track through a retailer. People are mostly rational actors…why would anyone spend money on something they can get for free? Right now the deterrents to and ramifications of illegal downloading are insufficient to curb piracy. This could change soon, but I remain skeptical of reliance on negative consequences to compel behavior. Positive alternatives, that encourage proper commerce rather than threaten illegal actions, are preferable. Artists are well aware of the challenges they face and are adopting several innovative strategies to monetize their music.

For new and emerging artists, the internet’s free-flowing distribution channels can be advantageous. Take The Weeknd for example. The Weeknd released three free EPs last year, encouraging fans to consume and share their music without restriction. It worked fabulously – the group just played at Coachella and boasts a massive worldwide following. Even established artists like Miguel are releasing free EPs or mixtapes as marketing endeavors. Of course, most artists will not be able to garner fans as rapidly as The Weeknd. Since you can’t plan on going viral, you have to be strategic.

The primary goal in this new digital music ecosystem, for an artist, is to incentivize fans to transact something of value, if not actual money, in exchange for free music content. I’ve seen two great examples of this in the past week. Kaskade, one of the most popular house DJs/producers, released a free download of his entire set from Coachella to any fan that tweeted about the download through an app fittingly titled “Pay With A Tweet.” I paid with a tweet without hesitation. Of course, after an artist like Kaskade enables such a transaction that his fans will embrace, it’s up to the artist to extract real value from that exchange. Therein lies the rub. How do you take those tweets and convert them into dollars?

I think a viable strategy is to deliver free digital goods (music content) to entice paid physical goods (concert tix, merchandise, etc.), but a tweet campaign alone will not achieve this. Miguel has perhaps a better handle on the free digital for paid physical exchange. He has been releasing the three volume EP “Art Dealer Chic” over the last two months for free through his website. All you need to do is submit your email address (thereby joining his mailing list) and then the download is enabled. While I love “Pay With A Tweet” from a fan’s perspective, collecting fan email addresses is the more business savvy route because it secures an avenue for future communication (i.e. prompts for physical sales) with the fan. Overall, I am curious to know about the successes and failures of both campaigns, as well as similar campaigns that other artists have undertaken. The more data we have, the better we can understand what works and how to convert fan interest into profit.

Allen Stone – Unaware

How did I not hear this until now? Great track!

Miguel – Art Dealer Chic

Rewarding two-set EP from R&B trendsetter Miguel