Last year, Radiohead released In Rainbows on its website using a pay-what-you-wish model. A few months later, Nine Inch Nails released Ghosts I-IV employing a similar scheme, only with more business savvy: There was a tiered scale with prices ranging from free (low-quality digital audio files) to $300 (which included a Blu-ray slide show).
Did that strategy work? Well, In Rainbows debuted at No. 1 on the Billboard charts when released in the physical format, and NIN's extra-deluxe package sold out, suggesting that the approach makes sense for bands with followings as large as Radiohead's and NIN's. Smaller musicians, however, face a different set of obstacles. Though recording is now dirt-cheap, they may lack the management to recoup funds from pressing the record. But since when have small bands made tons of cash anyway?
"If you look at the numbers from traditional record contracts," says Aram Sinnreich, a managing partner in Los Angeles-based media consulting firm Radar Research, "only the elite of the elite, the top 1 to 5 percent, would make any money whatsoever off their albums."
Because of record labels' profit margins, many acts wind up in debt to labels after signing their contract. "Under these conditions," adds Sinnreich, "over 90 percent would never see a royalty check. That's a sad secret of the industry." Giving away music at this point is more than just novel. Doing so dramatically improves the chances of a band's music being heard. A good example of this, says Ian Rogers, former Music VP of product development for Yahoo and now CEO of Topspin, is Saul Williams's latest effort, Niggy Tardust.
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"He sold about as many copies as he sold with his last release, which was on a label," Rogers points out. "But he was heard by ten times that, and that's affected his ability to tour; it's affected his entire livelihood. For him, the pay-what-you-want thing has absolutely been crucial to him or crucial for his career."
"Even at its peak, when it was a thriving industry, recorded music only brought artists a fraction of the revenue that merchandise and touring brought them," Sinnreich says. "Today that disequilibrium has been exaggerated by the plunging music retail market and by the expanding music merchandise and performance market."
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Evidence corroborates: Lyle Lovett recently confessed to Billboard that after two decades and 4.6 million albums sold, he's "never seen a dime" in royalties and has made his living primarily from touring. That's a sure sign that business-wise musicians must find new ways to survive. Instead of vying for record deals, Rogers says, most savvy musicians now aspire to strike deals for downloads, ring tones, T-shirts, website ads and licensing. Essentially, there has to be strategy behind such a decision. By going directly to the listener, many bands may deny themselves the chance to develop networking relationships with gatekeepers — booking agents, record-store owners, etc. — who could help them in the future. All of this leaves musicians with less time for making art.
But it might just be good for the industry.