Tech IT Easy

March 7, 2008

Ghosts, the new benchmark for music distribution

Filed under: Art, Business strategy, Economics, Internet, innovation, marketing, media — Kari Silvennoinen @ 7:56 am

As some of you have read from the news, a couple of days ago Trent Reznor of Nine Inch Nails released their new album for free on the net. The first part of the four part Ghost I-IV was uploaded to the Pirate Bay and is also available from its website.

Two days after the release, Ars Technica reported that the $300 limited edition, which was available on the site had sold out, meaning that NiN had made at least $750,000. In initial reporting many likened NiN’s approach to that of Radiohead’s In Rainbows, but as Ars points out, the strategy was different in many important ways.

First of all, Reznor uploaded the first part as a torrent, but even so, the album’s website was pretty soon on its knees - a reality check on the true adoption rate of bittorrent or web design/e-commerece mistake, as the free download section didn’t mention the torrent-option at all?

Secondly, and more interestingly, the whole album was released with a Creative Commons license and in the text-file accompanying the Ghost I goes so far as to say this:

We encourage you to share the music of Ghosts I with your friends, post it on your website, play it on your podcast, use it for video projects, etc.

This was missed by many news outlets, like New York Times and even The Register, which went as so far as to call people who uploaded the rest of the album to Pirate Bay as freetards and that they were robbing Reznor off “a cool $2m”. Sure, $2 million in that same opportunity cost money that copyright lobby is always talking about when talking about piracy. Unfortunately, opportunity cost is not real money.

Undoubtedly you’ll be able to find the complete collection on the same torrent network you found this file, but if you’re interested in the release, we encourage you to check it out at ghosts.nin.com, where the complete Ghosts I-IV is available directly from us in a variety of DRM-free digital formats, including FLAC lossless, for only $5.

FLAC? Blu-Ray? Creative Commons? Bittorrent? 320kbps MP3s that beat Radiohead’s 160kbps MP3s to the ground? It sounds like this band knows a thing or two about the interwebs.

So, this guys know what’s high-tech, but that’s not the end of the story. Now, limiting all the fun only to the first part would be traditional. Sharp-eyed fans were quick to note another thing on the website:

Ghosts I-IV is licensed under a Creative Commons Attribution Non-Commercial Share Alike license.

So, even though NiN didn’t make a big fuss about it, uploading and sharing the rest of the work was OK by them. Well, it was inevitable that the full album would hit the nets anyway. NiN simply encouraged their fans to get it from their website, apparently with good results. Paradoxically this approach means that each fan who gets the Ghosts I-IV from NiN’s website will make them at least $5 - while in Radiohead’s version, even then fan-income is not guaranteed, because the free version is always available (legally or not). So, the paradox becomes that by setting a fixed price they might end up better off.

It was really interesting (especially as a decision analyst) that fans were given five price-points, $0, $5, $10, $75 and $300 - each offering more value. In my opinion, this shows a good model for future internet distribution - differentiate between listeners and fans. This shift of focus from unrealized sales to realized value added sales was the innovation in this approach.

Unfortunately, it seems that this whole internet approach seems to work only for major, already known, bands. Hopefully things like SXSW’s massive 4 gig torrent Vincent mentioned earlier are ways to get the internet working for the smaller bands too.

Radiohead’s experiment really pales in comparison NiN’s. In retrospect, who could justify paying more than what was necessary - in this case nothing - for the same product while knowing there were people doing exactly that. Plain simply it didn’t make sense to pay for something if you could get it free. Note that in Radiohead’s model, those who wanted a CD or special editions were told to wait and go to a store, whereas all version were available at launch at ghosts.nin.com.

Then again, what else would you expect from the man who promoted his previous album with hidden USB drives at concerts and made the soundtrack for Quake - the game that pioneered internet gaming? NiN seriously raised the bar for the next high-profile band attempting internet distribution.

PS. If someone missed out on the Radiohead’s free In Rainbows, tough luck. It’s not available for download for anymore for any amount of money.

9 Comments »

  1. Awesome post, Kari! Expect a companion-post (which I actually wrote last night) to appear this weekend!

    I’m a big fan of NIN, so I’m sure I’ll enjoy it.

    Comment by Vincent van Wylick — March 7, 2008 @ 10:08 am

  2. Got full four volumes now. I really like the inclusion of the pdf as it makes it feel more like you’re buying a cd.

    Both this system and the instrumental style of their album also reminds me a little bit of what Future Sounds of London has been doing for a while: selling their cds online and offering a DRM-free download at the same time. Their “From the archives vol. 1-3″ albums are really great!

    Comment by Vincent van Wylick — March 7, 2008 @ 11:36 am

  3. Great post Kari! A bit in line with my post on piracy: this is exactly the kind of attitude I’ve been waiting for (I didn’t know about the Radiohead one -also interesting by the way, but, true, maybe less)! But indeed it only works for already known, successful bands. Some more thinking is needed to find a way to launch new artists, but I’m confident it’ll come.

    Comment by Emmanuel Perez-Duarte — March 9, 2008 @ 12:16 pm

  4. Indeed, very interesting post. I’m not surprised NiN didn’t get that much press coverage & find it rather normal that the first mover (Radiohead) in that kind of business model innovation takes all the press coverage or life would be too easy for followers.

    Another pretty cool trend is that real fans are willing to pay to support their favorite artists. On the one hand, there’s the long tail (a lot of people listening without paying), and on the other hand, there’s the big hearts (a few people willing to pay to support both work & talent).

    Comment by Jeremy Fain — March 9, 2008 @ 1:22 pm

  5. While I’m very happy this happened, I have to say I’m a little underwhelmed by the Ghosts-album. Unlike many artists, I value lyrics a lot with NIN and this album was 100% instrumental. As a result I felt a little ripped off, not money-wise, but spending time on something that failed to deliver. To see how powerful some songs from NIN can be, check out Johnny Cash’s cover of Hurt.

    If Radiohead sort of copped out by later offering their product in retail, I think that NIN copped out by delivering a sub-par album. I really don’t see this selling well in a “normal” environment.

    Comment by Vincent van Wylick — March 10, 2008 @ 12:04 pm

  6. Vince, you’re right. One thing lacking in pretty much every article on this album is exactly a review of the music itself. Many will undoubtly feel that this is a subpar release and this is unfortunate as it might hurt the whole process in the long run… bands only releasing crap on the net for small fee.

    One critique of Ghosts that I agree is that it feels like it wouldn’t have been released as a real release on the stores. On the other hand, I like the album.

    Comment by Kari Silvennoinen — March 10, 2008 @ 12:13 pm

  7. Brilliant post Kari.

    Here is the new job title you’ll soon be finding on jobserve.com : Global Rock Band IT Strategy Architect.

    Man, I’m polishing my CV waiting for this one …

    By the way, I hate to do that but I did a post on the Radiohead “In Rainbows” album here trying to address both the chanel and the content - sorry it’s in french and I dont have the “translate into english” button.

    Comment by ceciiil — March 12, 2008 @ 5:23 pm

  8. Ars Technica has an article on similar lines, but goes further with Reznor calling Radiohead’s experiment a “bait-and-switch”. I agree.
    http://arstechnica.com/news.ars/post/20080313-reznor-says-radiohead-offering-insincere-industry-inept.html

    Comment by Kari Silvennoinen — March 14, 2008 @ 9:46 am

  9. Well, the best way to probably see it, is as an experimental first step. As Thom Yorke put it: “in terms of digital income, we’ve made more money out of this record than out of all the other Radiohead albums put together, forever.”

    I think that clearly suggests that this isn’t the last we’ll see in this form of media-retail, and hopefully Radiohead will be less controversial in their release-method next time.

    @Cecil, regarding the IT strategist position. I’m not sure if you were joking, but I think you’re absolutely correct. Selling media is changing and you need smart people that understand both the nature of the internet as well as possess sound business-principles to do it. But, since margins may be lower, this means it’s either the band-manager’s job or some kind of media-company that serves multiple bands.

    But I also foresee traditional record-labels moving into this direction for their portfolios. The music-industry’s not dead yet.

    Comment by Vincent van Wylick — March 14, 2008 @ 1:54 pm

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