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UK band makes money because of piracy

I seem to writing a lot about music and ‘free as a business model’ at the moment, and a great post on Techdirt this morning has me at it again. This is such a great description of why bands can benefit from having their music freely available that I’m going to reproduce the whole thing:

At some point, it won’t make sense to post these sorts of examples any more because it will just be common sense that bands can and do benefit from so-called “piracy,” but every time we post one of these stories, we get people complaining that this couldn’t possibly work for others. When a band is big, then it will never work for small artists. When they’re small, it’ll never work for big artists. Once we even had a commenter complain that it might work for big artists or small artists — but it was the all important artists in the middle that it would never work for.

So, here we go again, with yet another example of a band that isn’t worried about piracy. It’s an award-winning acoustic folk duo out of the UK, called Show of Hands, where one of the members admits that one of the most popular ways that people find out about the band is when others share the band’s music, and this often drives them to come out to shows and buy CDs as well. The band points out that “piracy” is a bad description of what happens:

You may call this process ‘piracy’ if you wish – for me it is an act of generosity and it both increases our audience size and record sales. And as I always say on the night – if you’re going to do it anyway you may as well feel good about it! I believe the official term is ‘viral marketing’, and we depend utterly upon it.

Yet, if he listened to the RIAA or the IFPI, apparently, all this viral marketing that the band depends on would be “no different than common theft.”

If the bands don’t need to be making money from digital sales then it is unclear that anybody else needs to be. Which leads to the conclusion that the price of music online needs to be low enough that consumers decide that it simply isn’t worth the hassle of going to download pirate sites. That could be via subscription
services or via ad supported services.

This is more evidence that labels need to reduce their royalty demands. As I’ve said before labels’ expectations are shaped by the economics of a by-gone age, and clinging on to them is a perilous endeavour.

  • Dino Joannides

    Nic spot on !

    On another subject can you think of a way for Chelsea to accomodate all of the following in the starting 11 : Deco , Ballack , Lampard , Joe Cole , Essien , Robinho and Drogba ? ( we need at least 1 golakeeper and 3 defenders)

  • Dino Joannides

    Nic spot on !

    On another subject can you think of a way for Chelsea to accomodate all of the following in the starting 11 : Deco , Ballack , Lampard , Joe Cole , Essien , Robinho and Drogba ? ( we need at least 1 golakeeper and 3 defenders)

  • Dino Joannides
  • Dino Joannides
  • http://www.broadstuff.com alan p

    Nic, in every simulation we’ve done of market growth, “Free” tends to work well as a market growth technique. However, these same simulations show the strategy has two limits:

    (i) If everything is free, it is hard for good stuff to signal its quality vs bad, and you risk bad stuff driving out good

    (ii) Free is not in fact free, its offset economics (ie someone else is paying for lunch), and at some point the subsidy stops if there is no future prospect of making money.

    Music is an interesting example, in that one can always point to a single band that creates a buzz for itself, but what is more useful is to look at the total potential of the overall market – ie do we believe that there is as much money in T shirts and concerts as there is in selling music.

    There is no doubt that music fans (concert goers etc) spend a lot more than music consumers, but there is a limit to the number of fans and the opportunities for them to spend money. And this other stuff is already counted in the music market, so the it does not grow from 0 to replace bought music if it all goes to free.

    Also, if you just add up the spend/band between old bands and new ones, and if you assume spend on PR impacts popularity (and if you don’t…hmm, thats one industry gone :D )and put some assumption of “reputation half life”, you’ll find that those that are rich will carry on getting rich for quite a while

    Thus our analysis is that the overall music market shrinks in a “free music” scenario, and the market for new music shrinks more.

    Hmm..i can feel another “FreeConomic” blog post coming on :)

  • http://www.broadstuff.com alan p

    Nic, in every simulation we’ve done of market growth, “Free” tends to work well as a market growth technique. However, these same simulations show the strategy has two limits:

    (i) If everything is free, it is hard for good stuff to signal its quality vs bad, and you risk bad stuff driving out good

    (ii) Free is not in fact free, its offset economics (ie someone else is paying for lunch), and at some point the subsidy stops if there is no future prospect of making money.

    Music is an interesting example, in that one can always point to a single band that creates a buzz for itself, but what is more useful is to look at the total potential of the overall market – ie do we believe that there is as much money in T shirts and concerts as there is in selling music.

    There is no doubt that music fans (concert goers etc) spend a lot more than music consumers, but there is a limit to the number of fans and the opportunities for them to spend money. And this other stuff is already counted in the music market, so the it does not grow from 0 to replace bought music if it all goes to free.

    Also, if you just add up the spend/band between old bands and new ones, and if you assume spend on PR impacts popularity (and if you don’t…hmm, thats one industry gone :D )and put some assumption of “reputation half life”, you’ll find that those that are rich will carry on getting rich for quite a while

    Thus our analysis is that the overall music market shrinks in a “free music” scenario, and the market for new music shrinks more.

    Hmm..i can feel another “FreeConomic” blog post coming on :)

  • nic

    Alan – not sure why it is that money spent is important to signal popularity. There are other measures – such as how often a track is streamed or downloaded, or played on the radio to pick one that has been used for some time.

  • nic

    Alan – not sure why it is that money spent is important to signal popularity. There are other measures – such as how often a track is streamed or downloaded, or played on the radio to pick one that has been used for some time.

  • http://www.broadstuff.com alan p

    My point was more that the more money that is spent on PR, the more PR “potential energy” – aka mindshare – there is for that band vs others thaty are trying to compete.

    By and large existing acts – “incumbents” – have far greater mindshare, which a new act has to overcome.

    If all goes to free, the biz case for funding the new act is far worse as the ROI drops off vs the ongoing momentum of the old (sunk cost) PR spend.

    Essentially its a specific case of a startup trying to enter a market with a free service when the incumbent will also offer a free service plus back it up with a huge brand recognition)

  • http://www.broadstuff.com alan p

    My point was more that the more money that is spent on PR, the more PR “potential energy” – aka mindshare – there is for that band vs others thaty are trying to compete.

    By and large existing acts – “incumbents” – have far greater mindshare, which a new act has to overcome.

    If all goes to free, the biz case for funding the new act is far worse as the ROI drops off vs the ongoing momentum of the old (sunk cost) PR spend.

    Essentially its a specific case of a startup trying to enter a market with a free service when the incumbent will also offer a free service plus back it up with a huge brand recognition)

  • http://www.cirurgiaplasticaestetica.net Cirurgia Plastica

    People in the musci industry are fighting on the wrong side. Instead of fighting downloads on the net, they should encourage it, as the bands become more popular and earn more money from shows. People that really likes the bands would still buy their cds.

  • http://www.cirurgiaplasticaestetica.net Cirurgia Plastica

    People in the musci industry are fighting on the wrong side. Instead of fighting downloads on the net, they should encourage it, as the bands become more popular and earn more money from shows. People that really likes the bands would still buy their cds.