Give away the music and sell the show

The major labels are freaked out: CD sales are continuing their inexorable decline and iTunes sales aren't making up the difference. Meanwhile, tens of thousands of artists are giving away their music for free on MySpace, their own websites and independent MP3 blogs. This puzzles the labels. Don't these bands want to make money from their art?

Many do, but they're just smarter than most music industry execs. They understand the difference between abundance and scarcity economics. Music as a digital product enjoys near-zero costs of production and distribution--classic abundance economics. When costs are near zero, you might as well make the price zero, too, something thousands of bands have figured out.

Meanwhile, the one thing that you can't digitize and distribute with full fidelity is a live show. That's scarcity economics. No wonder the average price for a ticket was $61 last year, up 8%--in an era when digital products are commodities, there's a premium on experience. No surprise that bands are increasingly giving away their recorded music as marketing for their concerts, which offer something no MP3 can match.

Live performance is the fastest growing part of the music industry (up 16% in 2006 to a record $3.6 billion in North America) and with services such as SonicLiving (brilliantly described as a "digital-to-analog lifestyle converter") and TourFilter that notify you when some band in your library is coming to town, that's only going to grow more.

So there's big money in live shows (92% of the Rolling Stones' revenues comes from performance, not recorded music). Sadly for the labels, they don't get any of it. No wonder they're so against free music. It only helps the bands (and consumers)!

Here, from Wired's music blog, is a list of the top grossing touring bands of 2006.

1. Rolling Stones $150.6m
2. Tim McGraw and Faith Hill $132m
3. Rascal Flatts $110.5m
4. Madonna $96.8m
5. Barbara Streisand $95.8m
6. Kenny Chesney $90.1m
7. Celine Dion $85.2m
8. Bon Jovi $77.5m
9. Nickelback $74.1m
10. Dave Matthews Band $60.4m

Comments

[Chris Marstall]

hi chris from tourfilter here. The world of live music is such a great example of the long tail!

For example, on tourfilter, only 22 of the 13000+ bands in our database are tracked by more than 1% of our users (here is the list in order, note not one from the top-ten-grossers:
Sufjan Stevens
Radiohead
Wilco
the shins
Beck
Arcade Fire
Death Cab for Cutie
flaming lips
Broken Social Scene
sigur ros
Modest Mouse
Cat Power
clap your hands say yeah
tv on the radio
interpol
The Postal Service
spoon
the killers
Of Montreal
regina spektor
the decemberists
Yeah Yeah Yeahs)

Most of the people out seeing music on any given night in America are seeing long tail bands. The bands in wired's top-ten and my top-22 represent a tiny percentage of the thousands upon thousands of shows that happen annually at, for example, one of the 60 or so dedicated live music venues in Boston.

And these clubs are often packed, even on a weeknight, because of the unique way live music is marketed at smaller clubs. Many of these clubs have multiple (typically 3, but often 4 or 5) bands per night, 7 nights a week. Clubs book multiple bands because it is the bands themselves that provide the marketing for the night, bringing their friends and the power of their email lists and myspace friend networks to the door. So more bands, more ticket sales. If you look at the biomass of people in live music clubs in general across the country on any given night, the big names you mention aren't even on the radar - they are responsible for a night every couple weeks, at best, especially in the colder months.

Great post, I hadn't really thought through the long-tail dimensions of what we're doing much up until now!

[erwin blom]

You say it's bad for the labels but good for artists and public. The public remains to be seen, i have the impression that ticketprices here in Amsterdam, Netherlands have raise quite a bit during the last years. I don't know if there's a one on one relation, but it seems so.

[Andrew Ian Dodge]

I have always understood that for a very long time the money was to be made on the road rather than via record sales. Many bands get product out just so that they can tour.

Another place that helps bands is Garageband which has things like track of the day and allows bands to get other musicians to give em' advice on their music.

[Rob Blackie]

This is exactly how African musicians have made a living for decades. Virtually all music in Africa is pirated, so albums mainly act as marketing for live shows. One consequence of this is that if you live in a capital city of an African country for long enough virtually all the big stars will come through on tour.

[Luis Villa]

Chris, is there any data suggesting whether the money in touring is more or less concentrated in the head than is the case in CDs? This came up in a conversation with a friend the other day, and I speculated that live music was less top-heavy than CDs, but other than intuition I had no way to back that up.

[Thomas Clifford]

Hmmm...I wonder how Chris's thinking transfers into the digital-video world?

As a corporate filmmaker, production and post-production costs are gettng so inexpensive that it offers opportunities for clients to produce a video; either on their own or with seasoned producer, like myself.

So the question is: if creating a quality video is getting to be affordable for most people, where is the opportunity for those in the business to make money? i.e. where is the "band tour" for a producer to make money?

Hmmm...maybe in how well they tell the 'story?'

www.DirectorTom.com

[Chuck Fuller]

I'm not sure I agree that all music should be given away for free. Although the costs are virtually nil (other than recording/marketing costs), people still value their music tremendously. It's just a question of packaging it the right way so that both sides (consumer and producer) feel like they're getting a great deal.

[Tom Asacker]

Hi Chris,

To build on Director Tom's comment, I'd love you're view on something closer to your own heart: giving away digital versions of your book as well as full length, unedited streaming videos of all of your speeches, workshops, etc. via YouTube. Why or why not? Thanks in advance.

[Chris Anderson]

Tom (and Director Tom),

Those are good questions. On books, my view is similar to that of music. I'd like to give away the digital version of my own book as marketing for the print version, which is a different (and vastly superior!) experience. I think this would work for most other authors, too. Needless to say, most publishers don't see it the way I do.

For film, although the analogy appears similar, there is a real scarcity problem when it comes to theaters. Unlike bars, clubs and other concert spaces, there are very few cinemas. Although there are some filmmakers who have gone the give away the taster (or whole thing) to encourage people to go to see them movie in the theater (examples include everything from Serendipity to Four Eyed Monsters), it hasn't been enough to cross the almost impossibly high economic bar for sustained theatrical distribution.

--Chris

[Eric]

Great post, and great news for music lovers. The era of the carefully produced and packaged artist with little to no talent selling millions of albums is over. If you can't bring it in your live show, you won't be able to survive.

In addition, bands are finding an additional way to monetize their shows. Record, sell, and distribute the live album to the fans digitally. Nugs.net is partnered with some major bands (Metallica, Widespread Panic, Phish) to do just that.

[YLlama]

Re film: I wonder if more filmmakers are going to follow Crispin Glover's model with "What Is It?" (crispinglover.com/whatisit.htm), where he tours with the film, and adds value by throwing in a lecture and a dramatic reading from his book.

[Dave Winer]

Chris, I think the labels make lots of money on performances, and the bands make almost none. At least that's what came out when we looked at this stuff in Y2K, when Napster was the rage. It's possible that new bands aren't signing record deals, but the venues are still owned by bigco's so I'd be surprised if anyone but the biggest acts are actually making any serious money in live performances. I suspect that love is the big payoff in music, and always will be -- not money.

[Dave Winer]

BTW, this was the piece that turned so much thinking about the economics of music in Y2K:

http://dir.salon.com/story/tech/feature/2000/06/14/love/index.html

[Elvis]

Didn't the Grateful Dead figure all this out a generation or two ago?

[Mary Warner]

Those high ticket prices for the big bands may be backfiring. There have been quite a number of stories of show cancelations due to not enough tickets sold. From personal experience, I can tell you that a smaller venue musical performance is much more enjoyable than a large arena. Too many people caring too much about their own experiences in an arena to make it fun for everyone. Rude mob mentality rules, whereas in a small club, the initimacy forces more respect among those sharing air space.

[Shandooga]

I'm happy to see the music industry decline. Those bastards have ripped of every artist who ever signed with them and now they want pity? Ha! Let them get real jobs and work 9-5 like me!

Music is the one thing that should never be sold. What if I'm walking past someone's car and I *accidentally* hear a new song? How much do I owe for the copy in my head?

Furthermore, people don't deserve a privileged life of fabulous wealth and obscene vice based solely upon their ability to carry a tune or pander to the lowest common denominator.

[An Open Mind]

I think some clarity is in order.

Not all artists work for labels.

@Shandooga: Only one in a thousand (or less) is rich enough to do the cars and mansions crib thing. Even then, even less are the negative stereotype you suggest. The rest of us are just regular folks. Nearly none of us are full of vices (you are clearly showing serious closed-mindedness and prejudice). I'm tired of hearing this noise from little closed-minded Napoleonic ne’er-do-wells such as yourself.

Don't confuse labels with artists. Don't confuse recording industry execs with artists. There are two different conversations when one discusses whether or not anyone is making money. Get the facts straight, make sure you're talking about one or the other, and don't generalize.

As music property ownership is currently defined by precedence in the courtroom, sharing media files without the owner's permission is illegal. If you'd like for it to be different, work with legislators and lawmakers to change things. In the meantime, don't argue about nit-picked definitions of "stealing" vs. “copyrights” just to evade the issue of current rule of law.

Not all artists can tour. Some of us have jobs, families, and other things to do (to pay the bills) and music is our passion. Don't lump us all into one bucket. Again, generalization serves no argument and no person well.

Someone has to pay someone some amount for some of the work in producing media. If each of the nay-sayers would like to establish generous sponsorship funds (complete with the health benefits and perks that the nay-sayers themselves *might* have), then go for it. I'm sure that patrons and sponsors will get good music from musicians that don't ever get paid for their music.

Recording music has a cost that is not insubstantial. Period.

Instruments, buses (or other transportation methods), helpers/rodies, equipment, food, facilities, and utilities are not insubstantial with respect to cost.

Talented people should be supported, not viewed as pariahs - particularly when the detractor is only wishing to get media for free.

In closing:
Do I give away my music? Yes. I give away significantly more than I sell. It makes me happy that tens of thousands of people have chosen to listen.

Do I make money when a CD sells or when someone purchases a download from iTunes (or one of the other services)? Yes. As a matter of fact, I make just enough to support the music and not my family.

Are all labels greedy, unkind, thieves? No, they are not. Employees and directors of most music labels with whom I've had contact (or seen interviewed) are actually real people who are trying to have a profitable business.

Profitable businesses are a necessity. Try working for one that is not. Profitable artists are happy artists. When one doesn't have to worry about the mortgage, one gets to concentrate on one's craft and creativity.

[Vil Vodka]

This story really shows how things have changed...not just since the mid-90s...but since only a couple a years ago. The "future of music" story told back in the early 21st century described the artist of the future as one who composed, recorded, published, and sold music from the comfort of his/her bedroom. It was the new paradigm, but what happened? Now everyone from Lefsetz to Chris Anderson claims that the business of music still exists on the stage and that anyone planning on recording and selling as their main income source is following an old business model , even with the more accesible tools like Pro Tools, CD Baby, etc to make it all happen.
Now, I love seeing my favorite band on stage, especially in an intimate setting. But I would imagine that Paul McCartney still performs for the love of it and that at any given moment he can hang it up and live better than modestly off his royalties from the Beatles and Wings catalog. But what about tomorrow's superstar of yesteryear? Will Green Day and Nickelback be able to fund their retirements from back catalog sales 20 years from now or will the stage still be the primary source of income?

[Rich]

OK the posting is dead wrong in a couple of serious ways. First of all, it costs a LOT to produce recorded music. Studio, instruments, programming, engineering, not to mention the cost of years of study.

Second, while performing artists make money touring (if they are able and willing to tour), COMPOSERS get screwed if there are no royalties on the sale of music. Remember, composers and performers are not the same people, quite often. Composers don't make income from concerts, only from sales (and airplay, to a far lesser extent).

Digital theft hurts real people, like me (I'm a composer).

[preetam Rai]

Another think I like about live concerts is that a lot of money goes back to the local economy. The local contracters, the local F&B people etc.

[John I.]

Having red "The Long Tail" more than three times in a month, I begin to understand in economic terms what was something that I felt in the air for some time but just couldn't shape it and explain it.

These are - indeed - historical times....I am a Greek citizen, living in Athens and working as a Business Analyst for a major corporation...well....I can feel even here the tidal waves of the long tail effect (yeah!, even in my job). What infinite choice and "the wisdom of crowds" really implies is that "You can't chose for us anymore, you can't decide what we'll wear, how we'll eat, how we'll be entertained, who we'll vote, what our tastes will be, how we're gonna live our lives...you can’t THINK for us anymore"...the era of hits is losing its grip on consumers...and is losing big time!

From my part, I consider Chris Anderson as a "hit" (no offense there) showing and leading the way towards the Long Tail of everything! After all, what would be a more powerful expression of the Long Tail than the mere post I am writing right now!

These are historical times...

p.s. being an (amateur) musician and composer my self in a Rock band I have already felt something of the Long Tail effect by promoting our music through Long Tail (internet) channels :)

[Jeff Howe]

Nice post Chris. My thinking—-as elucidated in our profile of manager-cum-bomb-thrower Terry McBride from Nettwerk Productions (Wired; Sept. 06)--is that the future of the industry lies in "joint venture" deals in which the "music company" (they won't bear much resemblance to what we think of as a label) gets a cut of merchandise, tour revenues and all the other "ancillaries" that are becoming such crucial revenue streams.

[Frederik Marain]

Anomaly for Economics: why pay for music when I can take a free ride?
There's an interesting economic anomaly here, that dates from before the Web and Long Tail-phenomena put the economy on its head.
Economic theory (and psychology) predicts that people, when able to share a resource without being forced to pay for it, will take this free ride.
The free rider problem in Economics is the question of how to prevent free riding from taking place, or at least limit its negative effects (e.g. by taxes).
Yet, street musicians and other good street artists can make lots of money. I have observed street shows where at the end almost everybody in the crowd gave money. What's more: the better the show, the more people give. For economists, this is highly irrational behavior.
Does anyone know of the "free rider" problem being applied to street music and street shows?

[John Thacker]

Don't these bands want to make money from their art? Many do, but they're just smarter than most music industry execs.

How about a simpler analysis-- not only does the music industry and the bands have different interests, but famous and less famous bands have different interests.

Well Chris, you should also realize (and I believe that you do) that there's a difference in interest between bands that are already very famous and bands that are less famous or not famous at all. For bands who have already hit it big, going the traditional CD route may be more popular. For bands who have not, or are not favored and pushed by the labels, the free music route may be the best way to get more famous and make more money.

Just because the Long Tail is out there, and ability to make money on the fringes has increased doesn't mean that the blockbuster hits are totally gone yet-- or perhaps ever will be. Some bands take-- and succeed at-- the blockbuster strategy even as others bands are now using the new long tail strategy.

[Michael Bettine]

In a perfect world, we could all give away our music. Maybe the grocery store could give away it's food too!

As a musician, it's always been difficult dealing with the fact that my "product" is sound, and as such, it is an intangible good, that is, you can't put it out in your house like a chair, or a TV. In some ways it doesn't really exist, especially in this digital age. But it does exist, and it is real, and people want it - so why shouldn't they pay for it????

I make my living as a musician, which includes selling my music, either on CD or as a download. But I also feel that the "greedy robber barons" of the big labels are wrong to still charge the same big money for music today when the costs have gone down and the artist's royalties have NOT gone up. But making & recording music is still NOT FREE! So giving away my music is akin to me working a 9-5 job for no pay. I need to make money and recoup costs somewhere, as I don't make millions touring. That said, I'm looking to record another CD - if anyone wants to contribute towards the funding of it, they can contact me and I'll make sure they get a free copy when it's done!