home
about/contact
Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.
My personal website has links to my LinkedIn and Google+ pages and you can send e-mail to david [at] thelayaways [dot] com.
Support
If you enjoy this site, please consider downloading a Layaways track or album from iTunes, Amazon MP3, Bandcamp, or eMusic. CDs are available from CD Baby and Amazon.
links
music/media/tech:
Analog Industries
Ars Technica
AppleInsider
Brad Sucks Blog
Broken Record
Digital Music News
Duke Listens
Future of Music Coalition Blog
Hypebot
LA Times Technology Blog
The ListeNerd
Medialoper
Mediashift
MP3 Insider
Music Ally
Music Machinery
Music Think Tank
MusicTank
The Music Void
New Music Strategies
Online Fandom
Pakman's Blog
RAIN
Rough Type
RoughlyDrafted
Swindleeeee
TuneTuzer
Virtual Economics
economics/markets:
The Big Picture
Core Economics
Freakonomics
The Long Tail
Marginal Revolution
The Undercover Economist
mp3/music:
17 Dots
3hive
Fingertips
Shake Your Fist
Sounds Like the 80s
Unleash the Love
archives
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
May 2010
June 2010
July 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
June 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
April 2012
May 2012
June 2012
August 2012
October 2012
November 2012
December 2012
January 2013
February 2013
March 2013
June 2013
August 2013
February 2014
March 2014
September 2014
December 2014
March 2015
October 2015
November 2015
December 2015
October 2016
May 2017
December 19, 2008
The New Music Equation, Part 2by David Harrell
Back in February, I posted "The New Music Equation," which reduced the "voluntary payment/purchase" music business model to the following equation:
(A x B x C) - E = DWhat this equation ignores, however, is the growing number of ways for musicians to receive compensation for "free" music. Not directly from the listener, but from a third party.
where
A = the total # of people who acquire the work
B = the percent who actually pay for it
C = the average amount each person pays
E = total expenses (recording, marketing, promotion, etc.)
and
D = the total revenue received
So far, it's mostly compensation for ad-supported on demand streams, such as those offered by Last.fm the free streams of paid subscription services such as Napster and Rhapsody. Lala.com also pays musicians for the free streams it offers. I'm ignoring, for now, the revamped Myspace music player, as there's not yet a way for independent/unsigned musicians to participate. There are also some models like RCRD LBL that compensate musicians for actual downloads. And TuneCore recently announced a program for corporate-sponsored downloads.
Last.fm's new artist royalty program, for example, pays artists/labels for on demand streams of individual tracks. While there's some flexibility to the payout rate, for the third quarter of 2008, the per-track rate was 0.5 cents per on demand listen. The per-song payout from Lala.com is a similar amount. Using the standard payouts from iTunes, Amazon MP3, and eMusic (a varying amount), it's easy to calculate the number of free streams needed to equal the artist compensation for a paid download:
68 listens = 1 eMusic download
However, it's important to note that it's not an either/or proposition. Free on demand listeners are also potential purchasers of the music. But even if they never buy anything, they're still adding something to the bottom line.
Incorporating this "compensated free" component within the new music equation gives us:
(A x B x C) + (A x F x G) - E = DIt seems like the key for an artist/label is to -- as much as possible -- nudge listeners toward free music where there is an artist compensation component, even if it's only a fraction of a cent per listen or download.
where
F = percent of listeners/acquirers who listen to/obtain music from an compensating source
and
G = the average amount received for each listen/download
The question is, how far do you go in steering listeners to such sources? The basic math is in favor of only offering free music via a compensating source. However, my guess is that restricting listeners to such sources would probably reduce the first component of the equation, the total number of listeners/acquirers. Some potential listeners will no doubt balk at the idea of going to Last.fm, Lala.com, or a corporate sponsor's site to stream or download music.
Obviously, there isn't a single optimal strategy for every artist and label -- what works best will vary according to the size and demographics of the audience for each specific act (not to mention the actual artistic merit of the work itself). Yet if you're willing to go "free," maximizing the total number of listeners remains paramount, and I'd be reluctant to do anything to reduce that number.
tags: digital music eMusic iTunes eMusic Last.fm Lala.com
link 4 comments e-mail listen to the Layaways on Spotify
Follow @digitalaudio Tweet
More Digital Audio Insider: Newer Posts Older Posts
Subscribe:
RSS FeedAdd this blog to Del.icio.us, Digg, or Furl. Follow David Harrell on Google+.
The Digital Audio Insider Twitter feed:
Digital music jobs: Looking to hire? Looking for a job? Check out the digital audio insider job board.
Popular Posts
A Long Tail Experiment
By the Numbers: Using Last.fm Statistics to Quantify Audience Devotion
Lala.com Owes Me Sixty Cents
An Interview with Jonathan Segel of Camper Van Beethoven
Price Elasticity of Demand for McCartney
Sony and eMusic: What I Missed
The Digital Pricing Conundrum series:
Part One Part Two Part Three Part Four
THE LAYAWAYS
Out Now -- "Maybe Next Year" -- The New Holiday Album:
"This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium
"Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs
O Christmas Tree - free mp3 lyrics and song details
Away In A Manger - free mp3
Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.
"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop
"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive
"...melodic, garage-influenced shoegaze." -- RCRD LBL
Where The Conversation Ends - free mp3
January - free mp3
Keep It To Yourself - free mp3
Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.
"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music
"Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio
Silence - free mp3 lyrics and song details
The Long Night - free mp3
Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.
"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover
Let Me In - free mp3
Ocean Blue - free mp3
Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.
More Layaways downloads:
the layaways website