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Bands Take Pay What You Want To Merch... And It Works Great

from the business-models-that-work dept

While at the Leadership Music Digital Summit last week, I got into a fantastic conversation with Dave Allen, perhaps most well known for being in the hugely influential band Gang of Four. In fact, the reason I missed the panel discussion about ISPs teaming up with the RIAA was because the conversation with Dave was so fascinating. I hope to talk to him some more in the future as well, but he's a musician (who now helps other musicians) who really seems to understand the new business models that are out there.

Part of what we talked about concerned an experiment, where he convinced a few bands to stop offering set pricing on all of their merch, and instead, told them to ask each buyer what they wanted to pay. The bands that have tried this found that this made fans much happier. Many fans paid more than list price (even when told the "recommended price") because they really wanted to support the band. Other fans, who wouldn't have been able to afford the merch at the list price, came away much happier because they were able to afford stuff. Those fans become committed lifelong fans who are much more willing to spend more money in the future as well.

A few more bands have been taking Dave up on the challenge to try this model, and Ben Taylor (son of James Taylor and Carly Simon) recently tested it out and found that he made a lot more money doing things that way.
We took in well over $1000 in CD sales, double what we would on an average night. We normally sell 3 Full Lengths at $15 each and an EP at $5.

We sold a total of 84 CD’s averaging almost $12 per CD!

Last night we were in Jackson Hole, the trend continued, proving another good night. Where we sold 48 CD’s and averaged almost $11 a CD.

We are moving more product than we normally would and in average making more than what our CD were to sell on iTunes or a record store.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Matt, Apr 1st, 2009 @ 11:34am

    ignorance

    this idea has been around for a while and artists, etc are hideously afraid of it. I've even heard retail thinking it's the "Death of retail" when in reality it would apply there too.

     

    reply to this | link to this | view in thread ]

  2.  
    identicon
    Weird Harold, Apr 1st, 2009 @ 11:43am

    This entirely fulfills me view of the future of this stuff.

    Music is a free seller to upsell to merch and concert tickets.

    So then someone gives away music AND merch, to hope to sell concert tickets.

    Then someone gives away music, merch, AND concert tickets to hope to sell, I dunno, damn, what's left?

    This is so freaking funny as to be beyond understanding.

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Mechwarrior, Apr 1st, 2009 @ 11:46am

    Re:

    Well, obviously, you make a new product right? Is that too hard for you to understand? This aint a zero-sum game, man.

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    refe, Apr 1st, 2009 @ 11:46am

    Everybody wins

    It's natural for there to be a split between casual listeners and die hard fans of an artist. Pay what you want allows the die hard fans to pay for the value that they feel they are getting - which goes well beyond the piece of merch they are purchasing - and allows casual listeners to pay a price that is more in line with how they will actually use the product. If they can choose their own price tag, more of these casual listeners will choose to buy the stuff when they may not have otherwise, and each one now has the potential to become more invested in the band. When it works, everybody wins.

     

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  5.  
    identicon
    minijedimaster, Apr 1st, 2009 @ 11:47am

    Re:

    This is so freaking funny as to be beyond understanding.



    What? Everything you just wrote? Yes, you are correct.

     

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  6.  
    identicon
    hegemon13, Apr 1st, 2009 @ 11:56am

    Re:

    Really? Because I didn't see anything about this band giving away all that stuff for free. I did see something about them averaging $11-12 per CD. Perhaps it is beyond understanding because of your clear reading comprehension problem.

     

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  7.  
    identicon
    B, Apr 1st, 2009 @ 11:57am

    Re:

    Don't feed the trolls, kiddies.

     

    reply to this | link to this | view in thread ]

  8.  
    identicon
    SPAM, Apr 1st, 2009 @ 11:59am

    Re: Re:

    Yeah! If you feed trolls, they'll just come back later looking for another handout.

    Since everybody knows trolls have 9 lives, the only way to kill them is to skin 'em alive; make their skin into slippers, and wear the slippers until the wear out.

    Or is that cats??

     

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  9.  
    identicon
    Anonymous Coward, Apr 1st, 2009 @ 11:59am

    Re:

    LOL, oh man, all day! You are a freaking genius! You just come up with some insane perception of these articles!

    Where the hell did anyone say anything about giving away merch? They are selling merch for money and making profits on the merch! This is basic herd mentality of humans here! I'm a jerk and not easily swayed by others so I'll just walk on by since I can just google up places to steal their content anyways to play in my unlocked iPhone that rapes underage girls and sells the footage to old men for massive profits. I am also a defense lawyer for hardened BT criminals to help them continue their crimes against artists and music companies trying to make an honest buck.

    am I missing anything here to make myself a caricature of the typical internet user in WH's eyes?

     

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  10.  
    identicon
    RD, Apr 1st, 2009 @ 12:02pm

    Dont Feed the Trolls

    Instead, give them, and WeirdAssTard, a solid kick to the balls. What a complete moron. Yes WH, this story was about GIVING AWAY FOR FREE scarce goods and they didnt make ANY money! You nailed it! Idiot.

     

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  11.  
    identicon
    Anonymous Coward, Apr 1st, 2009 @ 12:09pm

    Fools

    Happy April fool's, idiots!

     

    reply to this | link to this | view in thread ]

  12.  
    identicon
    Anonymous Coward, Apr 1st, 2009 @ 12:13pm

    Re: Re: Re:

    cats! You have to burn a troll with acid or fire or they just regenerate the damage you deal! Alternatively you could cut their head off! If you are using 3.0 rule set you can use a magical weapon to ignore their damage resistance and regeneration.

     

    reply to this | link to this | view in thread ]

  13.  
    identicon
    SPAM, Apr 1st, 2009 @ 12:17pm

    Re: Re: Re: Re:

    Oh yeah!

    Hey man, only 3.5 or D20 Modern. :P

    Here's one: 4.0 came out only after THE man (G.G.) kicked off--which is why it's the "For Dummies" version.

     

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  14.  
    identicon
    Anonymous Coward, Apr 1st, 2009 @ 12:47pm

    More power to the guys for using this. Here is a question though. How do you think they would react if someone showed up and just started taking CD's and shirts? No payment, no nothing, just grab a bunch of stuff and walked off? Would that be right?

    That is what file sharing is like. It is a two way street, the artist is ok with someone paying less, the customer is thrilled. It is just plain wrong for the customer to force the same thing on to the artist.

     

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  15.  
    icon
    Jeffry Houser (profile), Apr 1st, 2009 @ 1:05pm

    Might Purple did this when I last saw them over the summer. I assume they got the idea from the Radio Head experiment.

    http://www.mightypurple.com/news.php

     

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  16.  
    identicon
    A member of the Techdirt community, Apr 1st, 2009 @ 1:06pm

    Techdirt comments section

    Mike, I love reading Techdirt but please can you improve the comments sections so that I can filter out people like Weird Harold?

     

    reply to this | link to this | view in thread ]

  17.  
    identicon
    asdf, Apr 1st, 2009 @ 1:08pm

    Re: ignorance

    I dont think it would apply. There are a lot of ghetto people that would just take things and leave.

    Music is just different.

     

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  18.  
    identicon
    RD, Apr 1st, 2009 @ 1:08pm

    FAIL

    "Here is a question though. How do you think they would react if someone showed up and just started taking CD's and shirts? No payment, no nothing, just grab a bunch of stuff and walked off? Would that be right?

    That is what file sharing is like."

    Ah, a WeirdHarold in sheeps clothing. No, that is NOT what file sharing is like. File sharing is the sharing of digital files, and there is no depriving the owner of the original. Once again, this is INFRINGEMENT, and is does not have the same legal standing as THEFT.

    Walking up to a table and stealing a shirt is theft. The shirt is an item that you have now deprived the owner of. A better (but still not perfect) analogy would be you walk up and take a picture of the shirt, then go home and make your own based off that image. Owner has the original, you have a copy (or sort-of a copy).

    I'm not debating whether its right/wrong/good/bad, but to equate these is incorrect.

     

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  19.  
    identicon
    zcat, Apr 1st, 2009 @ 1:10pm

    I often fix computers 'pay what you want'

    Since I have mild chromatophobia and feel really uncomfortable asking for money or putting a price on things, I just ask people to pay me whatever they think the job is worth. Usually I get more than I would have asked for so it works pretty well.

     

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  20.  
    identicon
    Dave, Apr 1st, 2009 @ 1:23pm

    Re:

    They hope to sell access to their hotel and/or bedrooms.

    Most artists give that away, now they can start charging for it.

     

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  21.  
    identicon
    Weird Harold, Apr 1st, 2009 @ 2:27pm

    Re: FAIL

    It only works for now because people aren't figuring out the costs. Enough bands do it, and people will ransack the tables and leave a couple of bucks total. Good numbers today before the people get educated doesn't mean good numbers tomorrow.

    Put this out on the net, explain it to people at their next show, and suddenly it will be a free for all.

    Remember, if you lower the price to nothing, sooner or later the value will catch up.

     

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  22.  
    identicon
    Anonymous Coward, Apr 1st, 2009 @ 2:28pm

    RD, if the merc. price is up to the buyer, then the buyer can determine the price is zero. If the artist chooses to do this because they know it will be good for them in the long run, that is perfectly fine, but to use file sharing without the artists permission is just plain wrong.

     

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  23.  
    identicon
    lulz, Apr 1st, 2009 @ 3:03pm

    Re: Re: FAIL

    Do you have any backing evidence to support your theory WH? Any examples of the doom soon to come from these heathens and their experimental business models?

     

    reply to this | link to this | view in thread ]

  24.  
    identicon
    RD, Apr 1st, 2009 @ 3:24pm

    uh....Business 101 anyone?

    "Good numbers today before the people get educated doesn't mean good numbers tomorrow."

    How is it you can spout such nonsense? You DO realize that EVERY BUSINESS EVER CREATED falls under this same maxim, right? Just to be clearer, NOTHING guarantees good numbers tomorrow. That is why its called WORK and RISK.

     

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  25.  
    identicon
    R. Miles, Apr 1st, 2009 @ 3:38pm

    Re:

    No payment, no nothing, just grab a bunch of stuff and walked off? Would that be right?
    That is what file sharing is like.

    Really? Because I can show you proof of just how wrong this statement is.

    Taking stuff means the good are gone. COPYING means just that... the goods aren't gone.

    Otherwise, iTunes is busting their damn asses replenishing all those mp3 files every minute.

    Or was this an April Fools reply?

     

    reply to this | link to this | view in thread ]

  26.  
    identicon
    Weird Harold, Apr 1st, 2009 @ 3:55pm

    Re: Re: Re: FAIL

    Just look around this website, scan the comments. How much does the average poster here thing a song is worth? Most of them think about zero. Why? Because they have learned that this is what they are worth. Why BUY a CD when you can just go take it online?

    merch is a different game - merch costs money to produce. So name your price means that you risk losing your shirt in more than one way. Basically, people today will likely pay on average what they thing the shirt is worth. But over time, when they learn that shirts ain't worth that much (because people give them away) then suddenly they aren't valuable anymore. Worse, by taking the value out of a scarce product, the only way you make the money back is by selling the "infinite product" (shiny disc)?

    If I teach you that you can have dinner at the best restaurant in town for any price (including free), you will probably pay a decent price the first few times, but then one day you will try lower and nobody will argue, then lower, and the one of your friends will call you an ass for paying anything at all "man, it's free, just walk out, nobody cares!". You think that restaurant will ever sell you a meal again?

    When everything is "free" or "name your price" what is left to actually make money on and have value for the consumer?

     

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  27.  
    identicon
    Cecil, Apr 1st, 2009 @ 4:01pm

    asdf

    Eventually, the musician will just have to blow people for money. Then for free. Give them the music, then give them the merch, then give them head.

     

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  28.  
    identicon
    The infamous Joe, Apr 1st, 2009 @ 4:23pm

    Re: Re: FAIL

    You must be a troll. No, no: Hear me out. I've read most of the comments you've left on posts I've been inclined to read, and there is *no* way you can actually believe the things you type while having the higher brain functions required to actually type it. No one can be THAT dense. Allow me to correct you:

    It only works for now because people aren't figuring out the costs. Enough bands do it, and people will ransack the tables and leave a couple of bucks total.

    Your first flaw is that you assume that people will go *out of their way* to rip off a musician. This simply is not true. They would have to hear of the band and their business model, then follow them to know when they'd be in town, then go to their show, possibly *pay to get in the door* just for a handful of free t-shirts and a cd they could have downloaded from their couch. Seriously? The people showing up would be regulars to the venue, fans, and the random extra few people who just happened to be there at the time. You are *again* mixing up digital and solid goods. While it is *easy* to download music (which is infinite anyway) it takes effort (as stated above) to go out and grab a few T-shirts to stick it to the musicians.

    I mean, honestly.

    Now, for the breakdown:

    The venue regulars could grab 10 t-shirts and run, but since they're regulars, they probably won't because they'll want to come back to the venue-- and coming back as a jackass probably isn't their goal. So they would probably be the type to take a free item, or at most below cost. (the effects of alcohol on judgement notwithstanding) There is also a chance that a regular really likes the band, and pays above average for the merch.

    The fans will no doubt pay above average for the merch. This is the nature of a *fan*.

    The random strays could swipe 10 t-shirts and leave with no ill after effects, though many "free candy" situations show that most people will not do this, especially if someone is at the counter collecting money-- but let's say they do anyway. What would someone do with 10 t-shirts from a band they didn't like? Make rags, sure, but who needs that many rags? In all likelyhood, they'd just be thrown away, or given away. Let's follow that path: You have recently grabbed 10 shirts from an unknown band in a bar you never go to, and your friends casually ask why the hell you have 10 shirts from a band they've never heard of. You explain that it was "pay what you want" and you wanted to pay nothing so you took 10. Congratulations, you have just advertised for the band. Also, there is the chance a random stray could like the band and pay above average, or even below average just to support the artists.

    What I don't understand is why you are so hell bent on saying that the current method for making a living as a musician is the *only* way, when clearly it isn't anymore. The times, they are a'changin', my Wierd little friend, and what once worked will not work for much longer. The fact of the matter is that the time has come where a cookie-cutter method for getting a band's name out there will no longer work. Creativity will now be King, and no one has *ever* accused the record labels of that.

     

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  29.  
    identicon
    The infamous Joe, Apr 1st, 2009 @ 4:46pm

    Re: Re: Re: Re: FAIL

    Oh sweet mother of pearl, where to start?

    How much does the average poster here thing a song is worth? Most of them think about zero. Why? Because they have learned that this is what they are worth. Why BUY a CD when you can just go take it online?

    Value != Cost. Air has no cost, yet is very, very valuable. Also, CD = Compact Disc, and I can't take a compact disc online, I have to actually go touch it with my hands. You are *really* bad at this whole digital/solid thing, aren't you?

    Furthermore, we have not "learned" that this is what they are worth, we have learned that basic economics says that the free market will drive a price down to its cost. Since it costs *nothing* to copy a digital song, the price will fall to zero. Which leads me to..

    merch is a different game - merch costs money to produce.

    This is you admitting that music costs nothing to produce.

    Basically, people today will likely pay on average what they thing the shirt is worth. But over time, when they learn that shirts ain't worth that much (because people give them away) then suddenly they aren't valuable anymore.

    Tell me, little howie, what is it that makes a plain blue t-shirt cost $5, and a blue t-shirt with a $0.30 patch on it worth $20? Perceived value. (again, value != cost) A non-fan sees an overpriced shirt, a fan sees a way to show their loyalty to the band, and to support the band. Why would a non-fan even *want* a band t-shirt? Poke your little head out of your cold little cave and let your beady little eyes adjust to the light-- we're not all cold, ruthless thieves with pack-rat tendencies. I don't want music from a band I don't like regardless of cost. Metallica couldn't give me an actual CD of their music. Nor their T-shirt. I would decline-- my closet space and hard drive space is limited-- I don't want music I don't like. Period. I will give unknown music the benefit of the doubt, but if it is no good, then I will delete it. This is one of your many fundamental flaws in logic, that "free" is all that's required for me to accept it.

    Worse, by taking the value out of a scarce product, the only way you make the money back is by selling the "infinite product" (shiny disc)?

    Oh, you silly, floppy-headed man. Shiny discs are *not* infinite. You obviously don't understand what that word means. It is not a geeky way of saying "a lot". Bad Howard.

    If I teach you that you can have dinner at the best restaurant in town for any price (including free), you will probably pay a decent price the first few times, but then one day you will try lower and nobody will argue, then lower, and the one of your friends will call you an ass for paying anything at all "man, it's free, just walk out, nobody cares!". You think that restaurant will ever sell you a meal again?

    You are correct, there would be *some* people who would cheap out. These are not customers, and should be ignored. However, if you told people to pay what they felt it was worth, and the chef made a delicious meal, then I would be willing to bet he would make more than if he just set a high price and limited his customer base. The flaww in this story is that there are a finite number of resources (both seating and foodstuffs). You really do have a problem dealing with this concept, too.

    I am beginning to think that you assume everyone is like you, and you are the type of person who would pay nothing for an excellently prepared meal if he could get away with it. For shame, sir. For shame.

     

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  30.  
    identicon
    The infamous Joe, Apr 1st, 2009 @ 4:46pm

    Re: Re: Re: Re: FAIL

    Oh sweet mother of pearl, where to start?

    How much does the average poster here thing a song is worth? Most of them think about zero. Why? Because they have learned that this is what they are worth. Why BUY a CD when you can just go take it online?

    Value != Cost. Air has no cost, yet is very, very valuable. Also, CD = Compact Disc, and I can't take a compact disc online, I have to actually go touch it with my hands. You are *really* bad at this whole digital/solid thing, aren't you?

    Furthermore, we have not "learned" that this is what they are worth, we have learned that basic economics says that the free market will drive a price down to its cost. Since it costs *nothing* to copy a digital song, the price will fall to zero. Which leads me to..

    merch is a different game - merch costs money to produce.

    This is you admitting that music costs nothing to produce.

    Basically, people today will likely pay on average what they thing the shirt is worth. But over time, when they learn that shirts ain't worth that much (because people give them away) then suddenly they aren't valuable anymore.

    Tell me, little howie, what is it that makes a plain blue t-shirt cost $5, and a blue t-shirt with a $0.30 patch on it worth $20? Perceived value. (again, value != cost) A non-fan sees an overpriced shirt, a fan sees a way to show their loyalty to the band, and to support the band. Why would a non-fan even *want* a band t-shirt? Poke your little head out of your cold little cave and let your beady little eyes adjust to the light-- we're not all cold, ruthless thieves with pack-rat tendencies. I don't want music from a band I don't like regardless of cost. Metallica couldn't give me an actual CD of their music. Nor their T-shirt. I would decline-- my closet space and hard drive space is limited-- I don't want music I don't like. Period. I will give unknown music the benefit of the doubt, but if it is no good, then I will delete it. This is one of your many fundamental flaws in logic, that "free" is all that's required for me to accept it.

    Worse, by taking the value out of a scarce product, the only way you make the money back is by selling the "infinite product" (shiny disc)?

    Oh, you silly, floppy-headed man. Shiny discs are *not* infinite. You obviously don't understand what that word means. It is not a geeky way of saying "a lot". Bad Howard.

    If I teach you that you can have dinner at the best restaurant in town for any price (including free), you will probably pay a decent price the first few times, but then one day you will try lower and nobody will argue, then lower, and the one of your friends will call you an ass for paying anything at all "man, it's free, just walk out, nobody cares!". You think that restaurant will ever sell you a meal again?

    You are correct, there would be *some* people who would cheap out. These are not customers, and should be ignored. However, if you told people to pay what they felt it was worth, and the chef made a delicious meal, then I would be willing to bet he would make more than if he just set a high price and limited his customer base. The flaww in this story is that there are a finite number of resources (both seating and foodstuffs). You really do have a problem dealing with this concept, too.

    I am beginning to think that you assume everyone is like you, and you are the type of person who would pay nothing for an excellently prepared meal if he could get away with it. For shame, sir. For shame.

     

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  31.  
    identicon
    The infamous Joe, Apr 1st, 2009 @ 4:47pm

    Re: Re: Re: Re: Re: FAIL

    I'm very sorry for the double post. :/

     

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  32.  
    identicon
    lulz, Apr 1st, 2009 @ 4:59pm

    Re: Re: Re: Re: FAIL

    Aha, what if the infinite good is bundled with the scarce good?
    For example, I went to a concert in which the $10 ticket also came with the new CD (it was a local band's CD release show).
    I could have just borrowed my friend's CD and copy it to my hard drive and not have gone to the concert. Instead of being a freeloader, I had a rockin' good time and the lead singer pulled me on stage so I could jump into the crowd (three times).

    The more and more bands bundle their music, the thing that fans enjoy and can get for free anyway, with the concert tickets or limited edition merch, the more appealing the deal -- and thus, more customers. If they accept that their music can't be sold conventionally anymore due to massive pirating, they can use the music to attract customers for their concert tickets and merchandise.

     

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  33.  
    identicon
    Jay Cosnett, Apr 1st, 2009 @ 6:05pm

    Dave Allen--2 steps ahead. As usual.

    Stephen M.R. Covey (author of "The Speed of Trust") tells a story of a 1-man doughnut shop. He had so many customers that people left rather than wait in line. Making change was what was slowing him down, so he started a "make your own change" policy. The result? Increased business (faster service), and overall people *overpaid* when making their own change. Bottom line, things (especially business transactions) happen faster when there's trust. What brought the credit markets to a halt last fall (and could again)? People used to doing business with each other every day stopped trusting each other. So (the credit) business stopped. And almost took the rest of us down with it.

    Another example of Dave's principle in action in a totally different industry:

    ---------------------

    www.kxly.com/Global/story.asp?S=9942764

    Store tells customers to pay what they want

    SPOKANE -- A Spokane business is trying to help out those who are suffering during these tough economic times, by letting people pay what they want to.

    David Madvin owns a tanning salon along Cheney-Spokane Rd. and over the past few months, he noticed that his clientele was shrinking as the economy got worse. To combat this problem, Madvin decided not to raise prices, but instead ask people what they you want to pay.



    Since Madvin started the pay what you want program, his business is up by about 10%.

    -----------------

    And another...

    ------------------

    http://www.kgw.com/news-local/stories/kgw_031309_lifestyle_resta urant_name_price.3053fe18.html

    Portland-area restaurant lets customers create their own prices

    By TERESA BLACKMAN, kgw.com Staff

    LAKE OSWEGO , Ore. – A Portland-area restaurant is offering guests the option of naming the price they want to pay for their meals in today's budget-strapped economy.

    The Blue Sage Cafe in Lake Oswego.

    Blue Sage Cafe managers said customers will still need to pay the posted price for their drinks, but they can write down the amount they want to pay for their entrees.

    ---------------------------

    Sounds like a next-gen business model to me...

     

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  34.  
    identicon
    Eldakka, Apr 1st, 2009 @ 6:07pm

    Re: Re: Re: Re: Re: FAIL

    Err, I think you are confused.

    The concert ticket is a scarce good.

    The CD is also a scarce good.

     

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  35.  
    icon
    Suzanne Lainson (profile), Apr 1st, 2009 @ 6:28pm

    The Tip System

    I'm intrigued with the idea because I have worked with musicians who have played coffee houses for tips rather than a cover. Not everyone will pay, but then others will drop $50 in the tip jar. So playing for tips can be more lucrative than charging a cover.

    But part of the process, which hasn't been discussed, is the human interaction when when giving the tip. Generally the person leaving the big tip does it visibility enough that the performer knows he has been given a big tip, and the tippers' friends also see the gesture. The guy who drops in that $50 is likely to wave it a bit in front of the tip jar before dropping it in.

    Conversely, someone who would take a t-shirt for free or $2 might not leave do it if everyone around him can see he's either a cheapskate or broke.

    So my recommendation would be to have the artist standing at the merch table so he can acknowledge the overpayments for merch and CDs, and can perhaps "shame" the underpayer from doing so.

    It also helps to have money in the tip jar, and to have a friend come over and put money in to show everyone else what is the "expected" behavior. If people see that others are paying full price a t-shirt, they are more likely to do so themselves.

     

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  36.  
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    Mike (profile), Apr 1st, 2009 @ 6:50pm

    Re: Re: FAIL

    It only works for now because people aren't figuring out the costs. Enough bands do it, and people will ransack the tables and leave a couple of bucks total. Good numbers today before the people get educated doesn't mean good numbers tomorrow.

    WH assumes, incorrectly, that most of the world are jerks. That's untrue. Most people have no problem supporting bands who they feel deserve to be supported.

    Put this out on the net, explain it to people at their next show, and suddenly it will be a free for all.


    Except that's not what happened. But, since when has WH ever let reality interfere with his thought process?

     

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  37.  
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    Weird Harold, Apr 1st, 2009 @ 7:27pm

    Re: Re: Re: Re: Re: FAIL

    Joe, Merch is different because you don't produce it yourself. You have to entirely outsource it. So your costs on merch is fixed, not variable at all. You can play on the recording side, you can play on the touring side, you can play on everything that is under your control, but merch is pretty much order it up and pay (and pay up front) which is one of the rare things that puts a band in the hole.

    So the problem is that if you give it away or allow it to sell under cost, you lose - real money.

    "You are correct, there would be *some* people who would cheap out. These are not customers, and should be ignored."

    Here's the rub: A few people cheaping out can start a trend. Word gets out, and suddenly people are only dropping $2 on the table for a T-shirt. If for every people that pays you $10 you have someone paying $2, you aren't making very much on merch - and merch is suppose to be one of the major profit centers in "Masnicks Music Buisness 2.0
    ".

    My main point in the end is this: We were told give away the music, it's promotion for your "brand" - and that brand sells scarce goods, concert tickets, merch, and so on. If you start to pluck away the remaining scarce goods and remove their income potential (or severely limit it), you can end up with no money at all.

    So music is free, merch is cheap, concert tickets are over priced so nobody goes to the show to buy the cheap name your price merch, and so on. It's almost getting to the point of "just sell 1 concert ticket for $10 million and retire".

     

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  38.  
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    cram, Apr 1st, 2009 @ 7:55pm

    I don't know if it will work for musicians, but I have seen it work for restaurants - here in Singapore, there is one whose motto is "Eat what you want, Pay what you like."

    People actually end up paying more than they would at any other restaurant, not only because they are not jerks but also because they want the place to survive.

    They know well that if everyone grabs a free meal, the place would shut down sooner than later, and that would be a huge loss, since the place serves authentic stuff that's hard to come by in this little red dot.

     

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  39.  
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    cram, Apr 1st, 2009 @ 8:14pm

    Joe

    "Furthermore, we have not "learned" that this is what they are worth, we have learned that basic economics says that the free market will drive a price down to its cost. Since it costs *nothing* to copy a digital song, the price will fall to zero."

    So how does iTunes rake in billions by selling the infinite goods, especially when "basic economics" has brought the price down to zero? Perhaps they aren't too bothered about basic economics but are focused more on marketing since they know that there's more to succeeding in business than basic economics. I hate Apple, but I love them for proving that the "can't sell infinite goods" theory is just BS.

     

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  40.  
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    cram, Apr 1st, 2009 @ 9:31pm

    Hi WH

    "Joe, Merch is different because you don't produce it yourself. You have to entirely outsource it."

    Oh Harold, didn't you know we live in a brave new world. Surely if artists can write, sing, perform, market, distribute and sell merch themselves - kill the labels, kill 'em all - surely it's just a step away for them to produce their own T-shirts, CDs, what-have-you.

     

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  41.  
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    Weird Harold, Apr 1st, 2009 @ 9:37pm

    Re: Dave Allen--2 steps ahead. As usual.

    All great examples of one of situations that work in very specific cases. Also, the full information isn't there.

    Example the tanning salon: His business is up 10%, but the average person is paying HALF what they paid before. While it's a nice story, there is actually the underlying question: Was he over charging before, or is he quietly going broke now?

    The restaurant example is even more, umm, contrived. You have to pay full price for your beverages (cokes often cost only a few cents and sell for $2.50 on their dinner menu), you can only get this deal during the week (their dead time) or for brunch. More importantly, the average item on their menu is about $8 to start with. So even if half pay nothing (but still buy a coke), they are going from a 12.50 ticket down to a 6.50 ticket - which is still above their food costs. Again, they are increasing business but shooting their bottom line in the foot.

    Both examples also do something I consider the worst thing: They are allowing people to set price, which is connects directly to value. It is hard as heck to ask something to go back to paying a higher price after the promotion is over, especially if you cannibalize any part of your existing business with your promotions. Those clients who were paying $8 for a tan might be a little upset to find out that some people are only paying 25 cents for the same thing.

    It's my biggest fear in the music business, that the rampant piracy and the lack of value placed on music by the younger members of society means that music may not have any true marketable value in the future. That doesn't just mean they won't pay for shiny plastic discs, but that they might not even find a come-on upsell with a CD in the package as having any real value at all.

    Mike will wander in soon as say "price and value are not related", but they are. Heck, even wikipedia says so.

     

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  42.  
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    Anonymous Coward, Apr 1st, 2009 @ 10:22pm

    ultimately a small group of fans will have to vote with their wallets so that musicians can continue to stay in business...look at trent reznor - 2,500 people bought his special CD box set at 300 apiece, subsidizing the millions of freeloaders. the same goes for concerts...

     

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  43.  
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    Mike (profile), Apr 1st, 2009 @ 10:42pm

    Re: Re: Dave Allen--2 steps ahead. As usual.

    Mike will wander in soon as say "price and value are not related", but they are. Heck, even wikipedia says so

    You just never stop being wrong, do you?

    I never said they weren't *related*, I said they're not the same.

    Value is a piece of the demand side of the equation (how much does an individual value a product is a factor in determining the demand curve). *PRICE* is the intersection between supply and demand. So they *ARE* related. The problem is when you indicate that PRICE impacts VALUE. It does not. It's the other way around, and value is only one component in price.

    I mean, this is like fundamental stuff. Maybe 3rd week of basic economics if your class is slow. The fact that this has been explained to you about 10 times already, and you still don't get it is almost comical if it wasn't just sad.

     

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  44.  
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    Suzanne Lainson (profile), Apr 1st, 2009 @ 10:53pm

    Churches

    Churches depend on offerings of variable amounts. Collection plate = tip jar.

     

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  45.  
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    ulle, Apr 2nd, 2009 @ 1:49am

    The one thing that confuses me is if rampant piracy is as bad as the studios say and people like weird harold continue to insist then why are companies like itunes and amazon making money selling music. Also I have to wonder why it is so hard to find any real numbers on how much this supposed rampant piracy is affecting the artists considering how easy it is to find plenty of evidence of music artists actually making good money. To me there just seems way too much emotional chest thumping by the pro studio crowd and not enough actual fact. Shoot even at the recent pirate bay trial the prosecution was claiming that pirate bay was 90% illegal copywrite stuff but were unable to provide any proof for that percentage.

     

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  46.  
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    Weird Harold, Apr 2nd, 2009 @ 4:58am

    Re: Re: Re: Dave Allen--2 steps ahead. As usual.

    Mike, actually it's early second week.

    Price does impact value - because over time, if the price is too low, people will value it less. It is very signficant when you give something away for free, you have to consider the impact on it's value. Give enough of anything away, and the value goes away.

    Price and value in the end are tied to each other with a rubber band - pull either one of them too far out of line, and the other one will follow.

    That was in the 4th or 5th week, if I remember correctly.

     

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  47.  
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    The infamous Joe, Apr 2nd, 2009 @ 7:01am

    Re:

    ITunes can still rake in money becuase the free market has been perverted by artificial monopolies. Intellectual property laws say that only one person (the copyright holder) can say who can and can't copy their work. Well, if the people with that right all charge 99 cents, the free market ceases to work because there is no competition to drive it down to cost. (in this case, zero)

    The reason prices fall to cost is because of competition: iTunes sells song for 99 cents, jtunes drops their price to 89 cents to drive in business, itunes then drops their price to 79 cents to get back customers, etc.

    I hope this wasn't posted too late for you to read it, because it seems like you were asking honestly.

     

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  48.  
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    ryan, Apr 2nd, 2009 @ 7:06am

    Re: Re: Re: Re: Re: Re: FAIL

    There are options when dealing with merchandise. Different sources often have different prices; bulk ordering may save money; also the idea of ordering in smaller batches so that you are not stuck upfront for a lot of money before you've had a chance to sell anything. But let's agree that your issue with merchandise costs is correct, i.e. that it's upfront and fixed and not close to free.

    If a band decides to give this model a try, and they start to lose money, they can modify it. Breaking even on at a concert, while not ideal, is not a complete failure. It is still advertising, potentially increasing the fan base, and not a loss.

    The point is that at least SOME bands are making money with this sort of model and that SOME are making more than they have with traditional price structure. You are ringing the funeral bells industry wide based on assumptions you are making, whereas actual bands with actual results are saying otherwise. Unlike using the big corporations to control everything where contracts set things in stone for long periods of time, this allows for fluidity.

    No one here appears to be saying that every band, every performer, and every artist must adopt this now and forever. The idea seems to be (and perhaps I am way off base in this assumption) that performers can, and perhaps should, try some variation of this (and other models for that matter) because there is potential for a big upside.

     

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  49.  
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    Anonymous Coward, Apr 2nd, 2009 @ 7:24am

    "No one here appears to be saying that every band....." Oh, but quite a few here believe that the artists should not care that their music should be free and the artist should make money on other things. They seem to believe that it is their god given right to have the music for free and the artist is wrong when they expect to be paid for their music.

    I know, yeah, I work for a record label/RIAA, greedy singer, etc. You can justify your actions all you want, but you and I know deep down how it really is.

     

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  50.  
    identicon
    ryan, Apr 2nd, 2009 @ 7:24am

    Re: Re: Dave Allen--2 steps ahead. As usual.

    Example the tanning salon: His business is up 10%, but the average person is paying HALF what they paid before. While it's a nice story, there is actually the underlying question: Was he over charging before, or is he quietly going broke now? If he was over charging before, and if this has lowered the average price per tanning session, then welcome to supply and demand. That's one of the points regarding the music business. discs are, and have been almost since their creation, overpriced. If they were priced more reasonably, it is not nonsensical to imagine they would sell more. But that might hurt profits, right? Maybe, but what is the problem with that? Owning a business does not mean you deserve a profit, let alone an exorbitant one. When a very few people (or corporations) control an entire industry (the music business prior to napster and the like) and over price everything, and then a rival comes along with lower costs (or free), it is also not surprising that the original oligopoly takes a massive hit.

     

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  51.  
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    ryan, Apr 2nd, 2009 @ 7:40am

    Re:

    Actually I was specifically addressing Weird Harold's idea on why variable pricing/"name your own price" merchandising would not work, and not the free music issue.

    However, if it is wrong for people to, "believe that it is their god given right to have the music for free," then can't you see how it is insulting when musicians (or more often corporations who are supposed to represent musicians) believe it is their god given right to have the music bought at the price they (the producers) want? The market doesn't work that way.

     

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  52.  
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    Anonymous Coward, Apr 2nd, 2009 @ 8:01am

    Ryan, yes, the market does work that way. I have something that I choose to sell. I set the price. If you don't like the price, you have the choice to not buy it. If the price is too high, then the business fails. The consumer determines the price by what they are willing to pay, but their alternative is to not buy the product.

     

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  53.  
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    Easily Amused, Apr 2nd, 2009 @ 9:10am

    reality: do you speak it?

    Harold, I love how you have taken real world experimental data and stated how it would never work because of your own person universal idea that people are jerks.

    You are in full-on 5yr old mode, eyes closed, hands over ears, shouting "LALALALALALALALALALA".

    This isn't theory, or conjecture based on emotions. This is actually happening. Now, not in the dystopic future you seem to envision. Real people in real bands of all sizes and levels of exposure are coming around to the new business world created by the culture fast and free exchange of information that has been created by the internet. And they are profiting from it.

     

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  54.  
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    The infamous Joe, Apr 2nd, 2009 @ 9:38am

    Re:

    The consumer determines the price by what they are willing to pay, but their alternative is to not buy the product.

    Unfortunately, my cowardly friend, you are describing the choices a consumer has in a monopoly. In the free market, your sentence would go like this: The consumer determines the price by what they are willing to pay, and their alternative is to buy the product from someone else.

    Unfortunately, the recording industry has had a nice little scam going for quite a while where they had a government supported monopoly on music. Ah, but the times, they are a'changin'. Technology has come along and is starting to open peoples' eyes to the ridiculousness of this monopoly-- they started to look for that elusive "other option" and Napster was born. Ever since, the recording industry has been throwing money at lawmakers to stop this natural progression of technology so they can keep the scam going, and it has worked to a point, by slowing the progress of technology.

    Now, what sense does it make to slow the progress of technology?

     

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  55.  
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    Anonymous Coward, Apr 2nd, 2009 @ 9:45am

    Monopoly? Yeah, there is no free music out there cheapskates can get instead of buying some stars music that is in high demand? There is competitors, you can get the free stuff or you can get the expensive stuff. What part of that don't you understand?

    You just believe everything should be free and choose to just claim what is not given free.

     

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  56.  
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    cram, Apr 2nd, 2009 @ 10:09am

    Hi Joe

    Thanks for your reply. Yes, I was asking honestly, because while Mike and every other expert on this site keep talking about giving away music and make money selling scarcities, iTunes is doing even better - selling infinite goods AND scarce goods. Full loaf better than half a loaf.

    "ITunes can still rake in money becuase the free market has been perverted by artificial monopolies."

    So everyone should have the right to sell an artist's music in a perfect world? I don't know how many musicians would agree with that.

    "Intellectual property laws say that only one person (the copyright holder) can say who can and can't copy their work."

    Not just copy their work, but make money of copies of the work too. Which is a good thing, I would say. But of course you'd disagree with me:)

    "Well, if the people with that right all charge 99 cents, the free market ceases to work because there is no competition to drive it down to cost."

    Which is exactly why IP protection was created in the first place. For a limited time the creator would have a monopoly on making money off his creation, after which it would fall into the public domain.

    "The reason prices fall to cost is because of competition: iTunes sells song for 99 cents, jtunes drops their price to 89 cents to drive in business, itunes then drops their price to 79 cents to get back customers, etc."

    But here the bigger problem is jtunes/ptunes/etc are all hosting the same MP3s for free. In spite of that iTunes has succeeded. How was that possible? After all, basic economics dictates that they should have failed - but they have mastered the art of selling what technically costs nothing to reproduce and what is widely available on the Net.

    As long as they are around and selling of infinite goods is not merely possible, but lucrative, what incentive does a musician have to give away music free?

    Thanks for your take.

     

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  57.  
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    Mike (profile), Apr 2nd, 2009 @ 10:51am

    Re: Re: Re: Re: Dave Allen--2 steps ahead. As usual.

    Price does impact value - because over time, if the price is too low, people will value it less. It is very signficant when you give something away for free, you have to consider the impact on it's value. Give enough of anything away, and the value goes away.

    This is why no one values air at all.

    Or roads.

    Or television and radio.

    Oops. Wrong again.

     

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  58.  
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    Suzanne Lainson (profile), Apr 2nd, 2009 @ 11:14am

    iTunes sells convenience

    I think one big appeal at going to iTunes is getting clean, legal files conveniently located in one place. People willing to pay the price find it preferable than messing with P2P.

    I put the turning point in the industry on the invention of the iPod with its huge storage capacity. When you buy a device that can hold 1000 songs, you start thinking in terms of collecting 1000 songs. Few people are actually going to go out and pay $1000 for that many songs.

    IPods seemed to foster the idea of collecting lots of cheap or free songs. I can't think of any other item (baseball cards, beanie babies) where people try to collect so much stuff and therefore need to get it free. Even in hobbies like leaf collecting or bird watching, it's done for free, but there is a time investment involved.

    In other words, the iPod screams, "Fill me up" so people do with lots of songs: from CDs they may or may not own, legal free songs, legal paid for songs, and for some, illegal downloaded songs.

    It was the iPod, with its huge storage capacity, that psychologically reduced the value of the individual song. The ringtone falsely suggested people would pay a lot for a digital song, but people buy relatively few of those, so they are willing to pay more.

    I'm a big fan of fee-for-unlimited music schemes because I want lots of music, don't care if I own it, and don't want to spend much time looking for it.

     

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  59.  
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    Anonymous Coward, Apr 2nd, 2009 @ 12:20pm

    Mike, you don't think you pay for those roads? Really? Maybe the govt. should stop collecting taxes since they are free then.

     

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  60.  
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    ryan, Apr 2nd, 2009 @ 1:59pm

    Re:

    "If the price is too high, then the business fails."

    Or, and I'm just spitballing here, the business could lower the price, or add value to the item, or find another way to increase sales rather then, you know, fail completely.

    The fact that the supporters of the music system not changing do not see that a lot of people on this site are advocating ways that music companies can stay in business (whether we like them or not) is bordering on comical. As it stands the music business will eventually go under, being supplanted by something much more efficient and beneficial to the consumer. Attempting to find that "something" sooner, rather than later might actually keep businesses afloat.

    ..

     

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  61.  
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    Mike, Apr 17th, 2009 @ 7:45am

    Re: FAIL

    Guess what FAIL, it IS theft! Under the law it is theft. It's called copyright law, and you don't have the right to share what's not yours. It's called intellectual property.
    Just because it's not physical, doesn't mean it's not property. As in software, music, photographs ect... I'm a songwriter. You didn't write my songs, I DID. You don't own them, I DO. The fact that you don't get that shows what's wrong with YOU. It is stealing. Open your eyes!

     

    reply to this | link to this | view in thread ]


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