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

  digital audio insider


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.

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.


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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:


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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...)


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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


A = the total # of people who acquire the work

B = the percent who actually pay for it

C = the average amount each person pays


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)


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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.


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    Out Now -- "Maybe Next Year" -- The New Holiday Album:

    <a href="">Joy To The World by The Layaways</a>

    "This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

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    Where The Conversation Ends - free mp3
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    <a href="">Silence by The Layaways</a>

    "The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

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