Digital Audio Insider -- the economics of music and other digital content

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
May 2025

March 10, 2008

The Patronage Model
by David Harrell

Via Online Fandom, I just learned about Jill Sobule's stunningly successful pledge drive to raise $75,000 to cover the cost of recording and promoting her next album. She's doing it public-television style, with various goodies for each donation level:

$10 - Unpolished Rock (but with potential) Level: A free digital download of the album, when it's released.

$25 - Polished Rock Level: An advance copy of the CD. Weeks before the masses.

$50 - Pewter Level: An advance copy and a "Thank You" on the CD.

$100 - Copper Level: All the above, plus a T-shirt saying you're a junior executive producer on the album.

$200 - Bronze Level: Free admission to my shows for 2008.

$250 - Silver Level: All the above, plus a membership to the "Secret Society Producer's Club," which means you'll get a secret password to a website where I'll post some rough tracks, or... something worthwhile.

$500 - Gold Level: This is where it gets good! At the end of my CD, I'll do a fun instrumental track where I'll mention your name and maybe rhyme with it. And if you don't want your name used, you can give me a loved one's instead. What a great gift!

$750 - Gold Doubloons Level: Exactly like the gold level, but you give me more money.

$1,000 - Platinum Level: How would you like to have a theme song written for you? I'll have a song you can put on your answering machine and show off. Again, this could be a gift.

$2,500 - Emerald Level: Mentioned as an executive producer of the album -- whoop-di-doo!

$5,000 — Diamond Level: I will come and do a house concert for you. Invite your friends, serve some drinks, bring me out and I sing. Actually, this level is a smart choice economically. I've played many house concerts where the host has charged his guests and made his money back. I'd go for this if I were you.

$10,000 - Weapons-Grade Plutonium Level: You get to come and sing on my CD. Don't worry if you can't sing - we can fix that on our end. Also, you can always play the cowbell.

She actually exceeded her initial goal, raising more than $80,000 from 552 contributors. And that includes 14 donations for $1,000 or more, with one at the $10,000 level.

A few thoughts: First, this is far different from Sellaband and similar concepts for "investor-based" musician fundraising. There's no promise of shared profits for the backers -- you get the various goodies listed for each donation level, but that's it.

Second, getting paid before hand is a LOT better than hoping for donations after the fact. From the first CD/download sold, Sobule's in the black. Plus, she'll have cash to promote the record from day one, making it far more likely to actually sell.

But beyond the financial success of the fundraising campaign, it also means that Sobule's going to have an incredibly motivated street team when the album comes out.

That is, many of those 552 contributors will call their friends and e-mail every person in their address books, urging them to buy the new disc, see her in concert, etc. So she's getting a benefit far beyond the actual cash windfall -- the pledge process is far better for her than, say, inheriting the same amount of money (or even more) from a long-lost relative.

Obviously, Sobule's not the first artist to do this sort of thing. Scott Andrew, for example, recently partially funded a record via pledges. His pledge total was substantially less, though given a lower profile (Sobule is former major-label artist), perhaps as impressive.

For artists that have an existing audience, I can't see any real downside to this type of financing. The question is -- does the model have legs? If more and more musicians do it, the novelty factor will disappear and the success of such appeals seems likely to diminish. And how many times can an artist go to the well -- will those same fans be willing to finance Sobule's follow-up release?

tags: digital music the patronage model Jill Sobule

link 3 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

March 07, 2008

New Pricing Option for CD Baby MP3 Albums
by David Harrell

CD Baby now allows its artists to set separate prices for mp3 albums and the physical CD versions. (Previously, the mp3 price was locked at the CD price.) And Derek Sivers reports that the company's direct mp3 sales of its distributed albums exceed the revenues received from most of its digital distribution partners:

Not to brag, but we've sold over $600,000 in MP3 downloads in the last few months, with NO marketing or announcements at all. That already puts CD Baby ahead of Emusic, Yahoo Music, Sony Connect, Verizon, MSN Music, Snocap and every company except iTunes, Rhapsody, and Napster...

UPDATE: Please see the comments for a clarification from Derek Sivers.

tags: digital music CD Baby mp3

link 2 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

March 06, 2008

Thursday Odds and Ends
by David Harrell

A couple of things from 26econ: Aaron Schiff found a great quote within this Wired story about Gavin Potter's quest for the $1 million Netflix prize:

"The 20th century was about sorting out supply," Potter says. "The 21st is going to be about sorting out demand." The Internet makes everything available, but mere availability is meaningless if the products remain unknown to potential buyers."

That pretty much sums up the dilemma faced by low-profile musicians -- the Internet means that any artist with a website/Myspace page/CD Baby account now has "worldwide" distribution of his or her music. The previous hurdle of having to convince outside parties (distributors, labels) is long gone. But, by itself, availability means virtually nothing, given that you're competing with an avalanche of available music.

I'm pretty much in agreement with Coolfer's recent assessment of widgets for selling music. And micropayments, which have flopped in the past, have many of the same drawbacks.

But what if the process were totally painless -- no passwords, no credit card numbers, etc? Schiff's running an experiment based on that assumption, asking readers to click on buttons for micropayments/tips ranging from one cent to one dollar. I'll be interested to see the results (and I'm wondering just how he proposes to make the process that easy).

Finally, to conclude on a completely self-promotional note, the Rumblefish music licensing store featured my band the Layaways in last week's e-mail newsletter and podcast.

tags: digital music micropayments

link 0 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

March 04, 2008

Tuesday Odds and Ends
by David Harrell

A year ago, I wrote a post (Lala.com Owes Me Sixty Cents) about lala.com's plan to share 20% of the money charged for each CD trade with the artist, either by direct payment or via a charitable healthcare foundation. Some lala.com members are now wondering what happened to the plan. (As far as I can tell, any mention of the 20% plan appears to have disappeared from the site's Help and FAQ sections...)

As noted by Coolfer, there have been a few technical issues with direct downloads of the new Nine Inch Nails album from the official band site. One reviewer of the Amazon.com mp3 version suggests:

Amazon's servers are better than NIN's own website so when I recommend purchasing it from Amazon instead.

More coverage and details about the different pricing options from the NY Times and A Quiet Revolution.

Finally, somewhat off-topic, but an interesting bit from Newsweek on bricks-and-mortar rental shops using a Netflix subscription to procure and rent DVDs:

"It's nice to be able to offer the latest foreign title that no one has heard of," says one Massachusetts store owner, who typically rents out 10 to 15 Netflix discs a month, saving more than $2,000 in annual inventory costs. (The $4.50-per-disc rental revenue more than covers his three Netflix accounts.)

tags: digital music lala.com Nine Inch Nails Amazon.com mp3 Netflix

link 0 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

February 29, 2008

Friday Fun: Classic Van Halen
by David Harrell

Maybe David Lee Roth doesn't know how to tip, but you can't fault his taste in pants and boots. The classic VH lineup mimes to "And the Cradle Will Rock" for a 1980 European TV appearance:

tags: digital music Van Halen

link 0 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

February 26, 2008

The Uphill Battle
by David Harrell

Imagine your indie rock band gets a phenomenal reaction to your new album, including:

Pitchfork love -- an 8.0 out of 10

Strong support and airplay from KEXP -- one of the biggest/best known CMJ-reporting stations

Rolling Stone names you one of the "Top 10 Bands You Haven't Heard of" for the year

Magnet Magazine's #3 record of the year

And this isn't a self-released/financed album -- you've got promotional muscle (new media, retail, and radio) and tour support from a well-known indie label with solid distribution.

Any guesses as to how many units you'd sell?

According to this post from Know the Music Biz's David Rose, "Conductor," the acclaimed 2004 release by the Comas, sold just a little over 5,000 copies. (He was an executive at Yep Roc when the album was released.) Rose discusses it in terms of a lack of "magic fairy dust" preventing a great record from reaching a larger audience.

I think it's also an example of just how insanely competitive the music industry is -- and that the "indie rock" genre is incredibly crowded. My guess is that, despite Rose's disappointment, the album probably did better than the majority of indie rock releases that year. At least when you factor in all of the self-financed and micro-label releases that are all competing for the purchasing dollars and attention of a relatively small audience. (This is just one anecdotal example, but a friend who ran a small, but well-respected, Boston label in the late 1990s and early 2000s told me that he usually did an initial run of 1,500 CDs for each release. About half of those discs were sent to radio, reviewers, etc., and he was usually pretty happy if he managed to sell the remaining stock...)

tags: indie rock CD sales record sales

link 0 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

February 21, 2008

The New Music Equation: Radiohead, Trent Reznor, Etc.
by David Harrell

It seems that the business model of giving music away and relying on voluntary payments boils down to the following equation:

A x B x C = D

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

and

D = the total revenue received

In theory, the beauty of the equation is that -- if all else remains the same -- any increase in A, B, or C, however small, results in more D. Also, because multiplication is commutative, the same percentage improvement in any of the components results in the same overall increase. That is, no matter what the original numbers are, a 10% increase in A, B, or C is equally effective and always results in the exact same increase in D.

In practice, however, A, B, and C aren't likely to be completely independent factors. That is, if you manage to increase A (total acquirers), you'll likely see a decrease in B, as more of those people will be casual/curious listeners who are unlikely to pay. That's not necessarily a negative to the bottom line, as what really matters here is the product of A and B, or the total number of paying listeners.

Yet B is also affected by the pricing options that average out to the C figure. Do you offer a set price those who are willing to pay (as did Trent Reznor with the Saul Williams release) or go the Radiohead approach, and allow any payment amount? The latter approach might result in a larger B amount (zero to $5 is a relatively big jump, maybe more people would pay if they had an option for $2.50), though you likely end up with a smaller dollar figure for C.

As Chris Anderson at the Long Tail and others have noted, Reznor seems to have REALLY focused on B, perhaps to the point of overlooking that the Saul Williams album did relatively well in terms of D.

However, the equation above also ignores E, promotional and marketing expenses (not to mention recording, mixing, and mastering costs). Adding that to the equation gives us:

(A x B x C) - E = D

Obviously, spending money on promotion and marketing can increase A, but it also creates the distinct possibility that D ends up being a negative amount. Which is what attorney/industry insider Chris Castle points out in this CNET story by Greg Sandoval (via this Coolfer post):

"Trent thinks that (150,000 downloads) is bad?" Castle asked. "I'll tell you bad. Bad is zero. Bad is when you spend $100,000 on marketing and tour support and you got nothing. Do you know how hard it is to go from a cold start and just get 1,000 people to listen to an album?"

Which takes me back to something that I've written about before: Musicians aren't just competing for the dollars of music fans, they're also vying for their time and attention, a commodity that is -- ultimately -- perhaps more limited than dollars. And that competition becomes a little fiercer every single day, with every new piece of music that is released and as every piece of older, previously-released music becomes available as digital downloads (legitimately or via peer-to-peer systems). Simply making your music available for any listener-determined amount won't necessarily attract enough listeners to result in profitable formula.

Right now, when practiced by high-profile acts, the model garners a fair amount of attention. But what happens if it becomes the rule, rather than the exception? At that point, the E part of the equation -- promotional spending -- might very well be the most important component. Hence, do we end up with a "new" music business model that still looks a lot like the old one, where musicians need access to outside capital to succeed at the highest levels?

Greg Sandoval thinks so:

Musicians are not the new labels. Artists need someone to provide financial support and business acumen. If we end up ridding the world of labels, we'll only have to re-create them--in some other, probably more nimble form.

I wouldn't go quite that far -- artists who are already successful could certainly go it alone and do well for themselves. But again, as the novelty of the "pay want you want" model wears off, most musicians won't be able to compete on the merits of their art alone. They'll likely need cash for promotion -- their own or someone else's...

related: A Little Is Enough (a guest post I wrote for Shake Your Fist)

tags: digital music free music

link 5 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

February 15, 2008

That's Where the Money Is...
by David Harrell

This sort of thing may not be new, but it's the first time I've noticed it. In a nod to Willie Sutton, the relatively brief liner notes for Shelby Lynne's new Dusty Springfield-inspired CD include this plug:

Master Licensing Contact: #310-865-0770

The album, BTW, is fantastic.

tags: Shelby Lynne music licensing

link 0 comments e-mail listen to the Layaways on Spotify

Follow @digitalaudio

More Digital Audio Insider: Newer Posts Older Posts

Subscribe:

RSS Feed

Add this blog to Del.icio.us, Digg, or Furl. Follow David Harrell on Google+.

The Digital Audio Insider Twitter feed:

Apple stock analysis

Digital music jobs: Looking to hire? Looking for a job? Check out the digital audio insider job board.

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