A Business Model Involving Free File Sharing

from the I'll-take-a-stab-at-it dept

John Paczkowski, who writes the always excellent Good Morning Silicon Valley came up with a great idea earlier in the week. He started the "Great Recording Industry Business Model Contest" where he asks readers to try to help the recording industry out a bit, since they can't seem to innovate their way out of the hole they've been digging. So, in exchange for suggesting business models that actually embrace file sharing, you could save the recording industry and potentially win a SiliconValley.com t-shirt. I'm always up for any contest that might lead me to winning a t-shirt, and I've been working on a longer piece detailing business models that embrace "free", so I figured I'd write up something quickly. It's the third entry in the bunch, and you can read it at the bottom of today's GMSV issue (or, simply click on the "comments" or "read more" link below, since I've reproduced it here). Now, a couple things, while it's based on something I'm working on in more detail, I really did just scribble this out in a few minutes and send it off to John. Also, I know someone is going to respond with "but, but, but, this model is worse for the recording industry than what they have now, so they'll never embrace it." So, here's the answer to that before we even get to it: that's the wrong comparison. The comparison is not to the system we have today, but to where the system is heading. As it stands, CD sales are rapidly decreasing and file sharing is increasing. No matter what is happening with the various lawsuits, the trend is clear. So would you rather go down with the ship, or pick up a rising business model on the upswing? It's a classic disruptive technology curve, and those that don't embrace new models will discover that their old models simply don't exist any more, no matter how much they like them. Those that do embrace the new models and do a good job building a business around them will find (just like so many cases of disruptive technologies before them) that the new market turns out to be much bigger than the old one.
Hi John,

I'll throw my hat in the ring with a "free music file" business model. Admittedly, this model can work somewhat with your own idea, but I think it's a combination like this that will eventually catch on.

I'm actually working on a longer article that details all this, but a quick summary of a potential business model. The fact is, when you're dealing with digital goods, you can't sell the music as a "good" -- they're not goods in any sense. So, you have to sell services or other tangible goods. And, if you're selling a service, you never sell past work, you're always selling future work. So ... with that in mind:

* Bands start out the old fashioned way, playing local shows. Building up an audience. They record a few songs (cheaply, thanks to inexpensive digital recording equipment) and use that to get some attention beyond local venues. They're encouraged to offer the songs as free MP3s and even *want* people to put them on file sharing networks because it gets them attention. They begin to realize that the music file is simply a promotional item for the fact that they make good music. Buzz on file sharing networks is important.

* If they get that wider recognition, they start touring more broadly, playing larger venues. They take the door money, and they sell some merch. Some people will still want CDs, especially if they can be offered cheaply ($5?) and include additional things such as liner notes and lyrics. Notice that Steps 1 and 2 are still the same as they are now (other than if you're completely manufactured by the recording industry).

* Now is when things get more interesting. You start to offer a "service." You might call it a fan club, but that has connotations. Let's call it a "subscription" to the band. When the band is still young and small, the subscription should remain pretty cheap and flexible. Say, you let people pay $10/year (less than the cost of a current CD), and they get benefits: direct contact with band members, early access to recordings, ability to request songs at shows. Give the fans their own special RSS news feed so they can be alerted every time the band has a new song for them to hear. Members also get discounts on tangible goods. T-shirts for 25% off. Actual CDs (with bonus features -- movies, games, who knows what) for less than anyone else can buy them. Easy access to recorded concerts right after each show that they can download also would be great.

* The band grows even more, and expands the fan club. They're playing larger venues, so they reserve the best seats for their members. Members get backstage passes. Maybe even the chance to win a concert in your backyard or something like that. The fan club membership prices rise (though not to ridiculous levels) as the band gets larger. Preferably those fans who joined early get grandfathered in at lower prices (incentive to support young bands).

The bands are now making money from (a) concerts (b) fans who are "subscribed" to their service and (c) still from selling tangible merchandise. Fans get to directly support the bands they like. The actual music can be enjoyed by a wider audience. Digital music files are seen as promotions, and thus a band is more likely to get a wider audience, meaning more people joining their fan club. No, not everyone will join, but so what? Not everyone buys CDs now.

If my choice is to buy 12 $18 CDs a year (one a month, say) or support 20 or so bands at $10/year getting all those extra goodies, guess which one sounds more appealing to me? I'm still spending about the same amount, but I'm getting much much, much more, as are the musicians, themselves.

Now, again, this cuts out some of the industry -- but it doesn't have to entirely. Promotions are still needed. A savvy promotional campaign (understanding the nature of using free MP3s as a promotional tool) would still help. Concert promotions are still important. Setting up tours. Setting up higher quality recordings. All of that. What's no longer needed is quite the same amount of CD distribution. Contracts would, of course, need to be restructured, since the industry now gets all their money from CD sales and bands end up with most of the touring money.

Mike Masnick
Techdirt



Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    momo, Sep 14th, 2003 @ 7:14am

    No Subject Given

    pfftt.. Why make anything so complicated?

    All they need to do is to start charging subscriptions for full downloads from their catalog. (Except they probably don't have their full catalog in electronic format)

    I'd pay $5 month for access to everything.
    That's probably too little for the record companies though. People would probably pay $10 per month for unlimited access. Even if that were to bring in too small an amount they could just have subscription tiers.

    Don't analysts love subscription based revenues anyway? Isn't that where everything else in life is going?

     

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  2.  
    identicon
    mhh5, Sep 24th, 2003 @ 12:49am

    No Subject Given

    has anyone tried out magnatune.com? Tipjar biz model for musicians.

     

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  3.  
    identicon
    Hamish Jackson, Oct 25th, 2003 @ 4:12am

    London view

    I am intersted by this debate; I am doing my dissertation on it. I asked myself the question just as they did 100 years ago, and I see live performance being in need of developing. Why not festivals in classy purpose-built venues like Music Halls, but with hotels and toilets that smell nice? Enjoyed the show? Buy a video! Sure, plug me in. Standardising of webstreaming will be enough to capitalise online with live performance, artists may even have their own branding industry in desiger merch, collection societies take $ for commercial use and stay watchdogs. Music is as free as you like, but you gotta pay to see the real thing, and live performance is as big as football.

     

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  4.  
    identicon
    Seun Osewa, Jul 3rd, 2004 @ 5:02pm

    Re: tried out magnatune?

    It turns out that, so far, what artists make from magnatune is not enough to make a living. Live concerts are a different matter altogether. A business model with lots of revenue streams, like this one is ultimately more robust.

    One issue I have been dealing with is the issue of revenue sharing for subscription-based business models that are offered by many as the best immediate solution.

     

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  5.  
    identicon
    cee, Aug 9th, 2004 @ 6:25pm

    i want to be a actress

    i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress..........

     

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  6.  
    identicon
    Anonymous Coward, Aug 21st, 2004 @ 12:01am

    Re: i want to be a actress

    I love Ernest Roberts because he is so hot

     

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  7.  
    identicon
    cristel, Aug 23rd, 2004 @ 2:21pm

    Re: i want to be a actress

    i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress i want to be a actress..........

     

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  8.  
    identicon
    allwaysmusic, Sep 16th, 2004 @ 10:02am

    Everybody is Happy!

    What a great idea... allowing digital music files to be free (promoting the band) and making money by charging for fan subscriptions, CDs, and merchandise instead!

    I would personally enjoy the premium seating at concerts idea. Maybe the band could even give the fan subscribers the chance to win an all inclusive package for two to one of their concerts.

    Fans get what they want (P2P); musicians get what they want ($). Everybody is happy!

    http://allwaysmusic.modblog.com/

     

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  9.  
    identicon
    allwaysmusic, Sep 16th, 2004 @ 10:02am

    Everybody is Happy!

    What a great idea... allowing digital music files to be free (promoting the band) and making money by charging for fan subscriptions, CDs, and merchandise instead! I would personally enjoy the premium seating at concerts idea. Maybe the band could even give the fan subscribers the chance to win an all inclusive package for two to one of their concerts. Fans get what they want (P2P); musicians get what they want ($). Everybody is happy! http://allwaysmusic.modblog.com/

     

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

  10.  
    identicon
    allwaysmusic, Sep 16th, 2004 @ 10:03am

    Everybody is Happy!

    What a great idea... allowing digital music files to be free (promoting the band) and making money by charging for fan subscriptions, CDs, and merchandise instead! I would personally enjoy the premium seating at concerts idea. Maybe the band could even give the fan subscribers the chance to win an all inclusive package for two to one of their concerts. Fans get what they want (P2P); musicians get what they want ($). Everybody is happy!

     

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

  11.  
    identicon
    hayley, Feb 18th, 2005 @ 11:55am

    Re: i want to be a actress

    i can make you one contact me on kimhaybay@aol.com hurry up this is your only chance

     

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  12.  
    identicon
    micky m, Feb 25th, 2005 @ 1:11pm

    Re: i want to be a actress

    go to "so you wanna get a talent agent"

     

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  13.  
    identicon
    Bailey L., Feb 28th, 2005 @ 1:21pm

    Re: i want to be a actress

    I want to be an actress also. I have dreamed of it forever. Im pretty, outgoing, a good singer, and have many traits of a real acting artist!!! I have had experience from acting in church plays since i was a 1 year old. I read acting books and tips and just love art and theatre. My acting role model is the girl from the phantom of the opera. She is wonderful. I saw that movie and i never wanted it to end!!! Well thanks everyone!

     

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  14.  
    identicon
    tiny, Apr 12th, 2005 @ 7:23pm

    Re: i want to be a actress

    probably won't happen, you don't even have the tenacity to learn proper English.

     

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  15.  
    identicon
    Amelia, Jun 8th, 2005 @ 5:46pm

    Re: i want to be a actress

    I also have dreams of the "Big Screen", however, anyone with the name "Bailey" really has no chance (unless, of course, you change it). Furthermore, you can't simply read "Acting Books" and think that you have what it takes. I have been in theater since I was ten, and been a practicing actress for a little over three years, and I can tell you- it's NOT easy. I have also seen 'The Phantom of the Opera' (more like forced to see it) and your "Acting Role Model" is horrible. See some DECENT plays, go watch artistic films, and get some training and then we'll talk.

    P.S.- In my, admittedly, short life, I have found that most people who brag about being attractive, are typically not-so.

     

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  16.  
    identicon
    fatima, Oct 11th, 2005 @ 7:29pm

    Re: i want to be a actress

    I WANT TO BE AN ACTRESS PLEASE SOMEBODY HELP MEE, MY NAME IS FATIMA, I AM 14 YEARS OLD, I AM FROM PERU. I REALLY WANT TO BE AN ACTRESS, THATS MY DREAM, I KNOW I AM GOING TO BECOME AN ACTRESS SOME DAY, AND IM GOING TO BE A GOODDD ACTRESS I PROMISE.

     

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  17.  
    identicon
    just call me bernadette, Dec 19th, 2005 @ 5:44pm

    Re: i want to be a actress

    so do i every one wants to have fame and fortune in the spotlight, signing autographs and having adoring faqns.. well its not ALL imposible its very posible for an ordinary girl or boy to become an actor or actress, but not only in the states, its posible to become on in diffrent countries and you dont/ wont need to learn to speak english that way

     

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  18.  
    identicon
    just call me bernadette, Dec 19th, 2005 @ 5:44pm

    Re: i want to be a actress

    so do i every one wants to have fame and fortune in the spotlight, signing autographs and having adoring fans.. well its not ALL imposible its very posible for an ordinary girl or boy to become an actor or actress, but not only in the states, its posible to become on in diffrent countries and you dont/ wont need to learn to speak english that way

     

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

  19.  
    identicon
    Clivio Delavisi, May 21st, 2006 @ 6:44pm

    Pfft!

    I agree...this shows you absolutely don't understand that the MOST important (and it will ALWAYS be this way) element of a new or veteran act's career going forward is promotion. Nowhere did you account for the enormous costs associated with that. Posting napkins with your band's URL on it won't exactly lead to the kind of fanbase that can sustain recording careers. Even with Pro Tools systems (or cheap assed PC's running Cubase or something) isn't going to cut it. People expect professional recordings.

    Sorry, but that business model of yours is pure fantasy.

     

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  20.  
    identicon
    Nikki, Jul 14th, 2006 @ 11:50am

    Re: Pfft!

    John, you're not a struggling musician, I can tell. Do you work for free? I hope so, since you seem to think musicians should. Music is much more than just live concerts. And less people are attending concert venues than ever before.
    It won't be long before there aren't many people writing good music either, because they won't be able to afford to. Being a musician is just a worthy a profession as being a doctor, lawyer, journalist or programmer. Why is it people go to art shows but would never dream of asking the potter to give away his work for free? Why should indie musicians be expected to give their music away for free?

    I know the argument "music is in the ether, it should be free" but we performing songwriters have to pay our bands, pay for the sound tech, pay for the recording (not EVERYONE is a recording engineer, and shouldn't be!), pay for the promotion and advertising, packaging, merchandise, website hosting, demo's and duplication, association fees, and...oh...some actually take lessons and go to school to learn this, and that isn't free either!

    Even PAID downloads don't pay. I had over 1065 plays and downloads last month through Itunes, Rhapsody and Music Match. I got paid a whopping $22.00. That's less than .02 per song. Volume wise, that's equal to selling 88 of my CD's for 25 cents a piece!
    In the last two years, I've seen a considerable drop in the quality of both venues and music. Most live music venues have closed their doors, or switched to DJ's. Some places even started requiring the artists to BUY tickets to sell!
    Many of the really good established artists in my city refused. The garage bands and amatuers took over. The quality dropped. People stopped going to live shows, so more and more venues started reducing the pay scale. Last year, I played a FOUR hour gig for a lousy $250.00, in an area I'd never played before, and I had to pay my band. They didn't want to hear original music, they wanted a juke box. I decided I'd never do that again. Now, for live acoustic original music in my large city, there are only four venues that offer reasonable pay, and they are all ticketed venues. They won't book an artist more than three times in a year, and the artist has to sign a contract agreeing to NOT PLAY anywhere for less money within a 30 mile radius for 1-3 months!! But they are also required to be able to pack a minimum of 50 seats. How does one build a following if one is not allowed to play in the area they are trying to build?

    Most venues have discovered that they can get a college age band or beginner performer to play for free and bring tons of friends for one night, and since there are hundreds of beginners with tons of friends, they don't even have to book the same person twice in a year. Indie festivals are notorious for not paying artists much. Even the National Cherry Blossom festival doesn't pay artists, AND doesn't permit them to sell CD's or merchandise!

    There is no easy answer. We created this monster, and now the listening public expects to get their music for free. Audiences are shrinking, venues are closing, and we are right back to the same situation where the only ones NOT making any money are the creators of the music.

    So, how do we performing songwriters make money with our music? We sell t-shirts. Yeah, that makes sense. lol

    Nikki

     

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  21.  
    identicon
    qwfdzne@mail.com, Oct 10th, 2006 @ 6:05am

    pldmksuoz zpkxhtw

    cgjph evckoh esibjtr dhtcrzsup rcyf wnpstydof osrvxudty

     

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  22.  
    identicon
    Mark, Nov 3rd, 2006 @ 9:21pm

    Re: Re: Pfft!

    Good on you, Nikki, get worked up!

    Get worked up because we musicians dont have an active union, we dont have a big budget to get heard in the media and we dont have many people left who can be bothered standing up for us.

    We are falling victim to bad attitudes and, even worse, NO attitudes. Most people just accept that music is free and dont even consider that it should be otherwise.

    Sure, giving away music is great promotion - maybe i can be the most popular man in the world who is still living below the poverty line.

    So thanks, Nikki, for kicking ass on behalf of your peers :)

    -mark

     

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  23.  
    identicon
    Anonymous Coward, Mar 20th, 2007 @ 11:24am

    Re: Re: i want to be a actress

    who cares

     

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  24.  
    identicon
    Dewey, Apr 2nd, 2007 @ 12:31pm

    Minggl offers several of these today for free

    The business model you describe is very much in line with what we envision as well. Minggl allows much of it today across all the major social sites. Just like an individual, a band can have multiple sites where they market themselves and Minggl puts profile owners in control at each of their favorite venue's

     

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  25.  
    identicon
    TONETTE FERRARI, Apr 9th, 2007 @ 7:09pm

    Payscale for live bands in Chicago area

    I'm Manager of a live band in suburban Chicago. How much is the standard pay rate of live bands performing in venues in the Chicago suburbs. Is it hourly pay or the rate is good for a whole night's set? How many sets in a night's performance is standard?

    Please let me know as soon as possible.

    Thank you,

    Tonette

     

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

  26.  
    identicon
    martin, Nov 28th, 2007 @ 8:31am

    Why not the first song/album is pay what you want with a stipulated total amount needed in order to make subsequent songs.. E.g. They would say they need to raise at least £6000 in order to make the next song/ album. The amount they ask for will take into account the cost of production AND a profit margin for the artist.

     

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  27.  
    icon
    Derek (profile), Dec 28th, 2007 @ 10:40am

    re: nikki

    Nikki, No one wants to have to give their stuff away for free. You spent your hard earned time making it, so you want people to support you. The problem is that people are used to getting music for free now, and whether it is right or not makes no difference. So basically what you have is no demand to purchase your music. It would be like selling plain old sea shells at a beach, who would buy them?

    In the future, music will no longer be a tangible good that is bought or sold. (you don't have to agree with me, but thats where things are going) Instead, a lot of music will be used as advertisement. For example, Chevy uses a famous song that everybody loves in their car commercial, why? because people will hear it and pay attention, and it sticks in their mind. The same thing would happen when i hear a "badass" song, I would be proud to buy and wear the bands t-shirt.

    The nice thing about this change is that Artists will no longer be able to put out a song and just make money from it. They will have to be more accessible, and more creative. Finishing the song will be just the beginning. (not that its the end now, but you get the idea) This will be much better for the fans in the long run.

     

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  28.  
    identicon
    Tiffany Brooks, Jan 16th, 2008 @ 10:29am

    Re: re: nikki

    Derek,

    The way you described the future of music just makes me want to stop providing music for the public. Clearly, there is no respect and appreciation for what we do. The public doesn't deserve music if they are not willing to pay for it. We all know that people will pay for something they value and according to your comment, people don't value music anymore.

    That's fine. Songwriters, composers and other musicians will get the message and stop producing music, because they do need to eat and won't have time to fool around with thieves! How insulting that they'll pay for a t-shirt, but not our music. How insulting!

    If advertising companies pay for our music, then that's what we'll devote our time to. Screw the public! They've sure screwed us!

     

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

  29.  
    identicon
    tushar, May 16th, 2008 @ 4:35am

    business administration

    hello sir i am a diractor of private limited company and we have also trasformer repairing factory so will you just tell me how many world faimous business available in world i mean to say some extra ordinary business

     

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  30.  
    identicon
    Rods, Jul 16th, 2008 @ 5:15am

    Missing the Point!

    While this is a compelling business model it realy does MISS THE POINT of online marketing. Looking at the date this was writen I can understand how this oversight might have happened. Before social networking took the net by storm everyone still viewed the power of the net as a promotional marketplace. It's not. THE INTERNET IS SOCIAL!

    We need to focus on rewarding our fans. We don't just want fans but good fans. Brilliant fans. Fans that talk their head off about how awesome we are and use words that make us sond amazing. We want those fans to come and join into our network as fast as possible. Why would we want to penalize them for their fanaticism? We want to reward them for it in a way that will force them to talk more...

    So the whole idea of paying subscriptions for contact is outthe window. Contact is a reward to diligent fans who do better promotion than we could dream of. The dollars have to come from all of their friends... If they are really such true fans then they can convince their friends to spend mega-bucks on us because we're just THAT COOL! They will be better salesmen than we will ever be. We need to empowe them to convince people to pay us money. Do that nd we'll have a good business plan...

     

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  31.  
    identicon
    Anonymous Coward, Aug 29th, 2008 @ 6:09am

    Re: No Subject Given

    The assumption is that people will have free access (through P2P) to any digital content they want, including any band's entire catalog of previously released music. If you think that asking people to pay a monthly fee to download music is the answer, you obviously don't understand the problem.

     

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