The secret to making money on the web: Give it away free…

17 Jan

Originally posted 22 April 2009 @ Foviance.com

There’s been a lot of talk recently about how to make money from social media and micro-blogging, but the majority of the proposed or existing business models are conceived by businesses seeking ways to make money by shoehorning their brilliant idea into someone else’s success. There are few business models which are based on engaging with users and giving them what they want.

Over at wired.com, Digg founder Kevin Rose writes a fascinating article about uber-Goth, Trent Reznor, of Nine Inch Nails fame who, upon being released from his record company, initiated what few can deny is the most revolutionary shift in the music business since Milli met Vanilli. The hook of the article concerns the recently-released NIN iPhone app which allows Apple-savvy fans to upload and share all kinds of band-related gumpf, uploading photos live from gigs and even finding other fans in their immediate vicinity. But what is most interesting to me is the backstory of how Reznor has harnessed the interweb to cut out the record company middleman and market himself directly to his fans. NIN have created a business model which allows them to make money by, ironically, giving their music away for free. To quote Reznor: “I’ve said it before and I’ll say it again: I don’t think music should be free. But the climate is such that it’s impossible for me to change that, because the record labels have established a sense of mistrust. So everything we’ve tried to do has been from the point of view of, ‘What would I want if I were a fan? How would I want to be treated?’ Now let’s work back from that. Let’s find a way for that to make sense and monetize it.”

It appears to be working. Despite giving his latest album, ‘The Slip’, away for free and openly entreating fans to download and distribute it via filesharing, NIN still sold 250,000 copies of the $10 CD via their website (it’s also available on iTunes). But beyond mere album sales, there are huge benefits to be recognised by directly engaging with your fan base, such as capturing a wealth of personal information about fans who register on the site and so are able to target them with information about new releases or upcoming live shows in their area. The whole premise of the business model is basically delivering maximum benefit to the fans at minimal expense to the artist. By utilising existing social networking tools they have no development or maintenance costs and leverage the power of a tried and proven platform. They don’t even manage it themselves…they outsource the admin to the ultimate ready-made labour force: their own rabid fan base. These are the kind of people Kevin Kelly describes in his theory of ‘1,000 True Fans‘ whereby for an artist to make a living they need only 1,000 true fans. A true fan is “someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. They buy the t-shirt, and the mug, and the hat. They can’t wait till you issue your next work”, or as Reznor so eloquently puts it, “People who have the same maniacal completion problem that I have playing videogames, let them funnel that stuff into making our website cool.” These uberfans receive no payment other than enjoying special privileges on the site as well as the bragging rights to being an official (albeit unpaid) cog in the NIN machine. And I daresay there are a lot more than 1,000 of them…

Think what you will of Reznor’s store-bought nihilism or his music, the guy really knows how to subvert a paradigm. Effectively what he’s doing is fulfiling the dream of every struggling musician but on a global scale, bypassing the totalitarian tentacles of the record companies and taking his music directly to his fans, writ large on the canvas of the interweb. Having been one of these struggling musicians myself, I know all too well the biggest hurdles facing any wannabe rock star are exposure and distribution: two things the interweb is best at, arguably what it was designed for. What it took was a savvy disgruntled visionary to figure out how to make it work. The thing that sets Reznor apart is that his business model is not based around making huge profits; what he has created is the first fully user-centric business model which is all about giving fans what they want: easy access to music, a connection with the artist and a connection to others who share their passion. The music is but a small piece in the NIN empire…no longer simply a product for fans to consume but merely the base of the pyramid upon which everything else is built.

Of course, it’s all well and good to be giving your product away for free when you’re already hugely successful and a highly-recognised brand. Not so easy for the aforementioned struggling musicians rocking out in their collective bedrooms. Could the same model work for them? Potentially, yes. Ultimately, the onus, and the power, rests with the artist, as Reznor says, “As an artist, you are now the marketer.” But still the biggest challenge facing up and coming artists is getting noticed. The vast opportunities for exposure that the interweb opens up, allows for vast competition. But for the first time in a long time in the music business, it is the quality of the product that will determine whether an artist is successful or not, not the marketing power of a record or PR company. Do you honestly think any of the current crop of boy/girl bands would be rich and popular if they were judged solely on the quality of their music?

Yeah…thought not…

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