Will Radiohead be able to sell what it has given away?
Today the CD called "In Rainbows" by Radiohead (a British rock band) goes on sale, and the sales figures will provide an exhibit in the relationship between free downloads and retails sales. the New York Times covers the issue here, but I think we all know what the results of this little experiment will be. CD sales will be amazing.
Now, obviously, Mises.org has a strong interest in this subject because this site gives away for free just about everything we can, while still making the hard copy available through the store. The idea is about service here: getting the good out to people in every form possible. Now, the Mises Institute is a non-profit educational organization so our incentives are not the same as a regular business. Even so, there are lessons that apply in many directions.
There are two issues here that are getting mixed up. One relates to copyright, the mercantilist law that forbids the perfectly peaceful action of spreading around a good of infinite supply, whether that good is a sequence of notes or an arrangement of letters or pixels in an image. The second issue relates to an empirical question of what constitutes good marketing and entrepreneurship.
What's been happening up to now is that copyright issues have encouraged and spread what is essentially an entrepreneurial mistake: the failure of many publishers and studios to take full advantage of electronic media as a means of marketing their wares. They have believed that giving stuff away kills the market for sales, when the reverse might actually be true.
I can recall talking with an ice-cream entrepreneur a few years ago who was actually under the belief that his copyrights, trademarks, and patents were the source of his success -- and not even he seemed to fully grasp that the reason for his success was in in fact that his ice cream is good and customers are willing to buy it! So it is for music. People will buy this CD because they want to own the CD, not because the digital content has been withheld pending payment.
Another error has been to assume that the possible market for a product is fixed and limited rather than vast and expandable. Perhaps only one person in ten thousand who downloaded the Radiohead CD will buy the thing but that might still be more than would have bought it had the CD never been distributed online.
The critical thing here is that a digital download is not the same good as a CD. I can imagine that there are times when they interact as substitute goods but there are also conditions under which they interact a complementary goods -- and much depends on the individual consumer.
So, no I'm not arguing that giving something away for free guarantees that it will sell later. In fact, it probably makes matters a bit tougher for the entrepreneur. The point is that the best form of marketing is to get the word out to as broad an audience as possible. When it comes time to ask people to pay, you have to be prepared to offer something of value in exchange. In this way, commerce depends not so much on withholding but on generosity.
At some point, publishers and sound studios etc. are going to catch on and realize that their obsessions over "intellectual property" are blinding them from seeing and acting on the greatest marketing opportunity in the history of the world.
Comments (16)
martinf
Very interesting post.
Internet has evolved and grown so much spontaneously and freely. If we love liberty and agree with Austrians, we should let it work.
There will always exist people who will try to stop this evolution, such as some music industries or lobbies (we have one very important lobby in Spain called SGAE. They have managed to impose a sort of tax burden on all products related to digital stuff, such as iPods, printers, mp3s, etc.). Other entrepeneurs will try to adapt and change their business model according to consumer's new preferences, creating more innovation.
But it is such a pity that those protectionist/mercantilist ideas led by powerful lobbies and supported by the State have imposed on us an additional tax burden in some products (I mean the Spanish case).
Published: January 1, 2008 9:20 AM
TLWP Sam
So people reckon because a CD can copied in a way that the owner hasn't been deprived of any physical objects then copyrights are bunk. Yet what is then the right of the person who parks their car is known to leave it for hours on end. Could not a person take the car, drive it around, top up the fuel tank and park it in time for when the owner want to use it? After all, the owner was not been deprived of his car. The other person just didn't have the permission of the owner to use the car.
Similarly, what if you have a wireless internet connection with no real download limit and a neighbour knows when you aren't using your internet connection and he connects his computer to your internet account with his wireless modem? Likewise you're not be deprived of anything either nor are you getting charged more because of his usage either. He once again just doesn't have your permission.
Published: January 1, 2008 9:38 AM
Michael A. Clem
No, what I "reckon" is that digital downloads and compact discs are not mutually exclusive items, but complementary items, and that good music will still sell cd's even if there are free downloads available. Radiohead's actions are only peripherally related to copyright, and more closely related to marketing.
Published: January 1, 2008 9:50 AM
Henry Miller
TLWP:
There are a few reasons my neighbor shouldn't borrow my car while I'm sleeping: if I got an emergency call about mom (other friend relative) being in the hospital I'd need to get up to go visit. There are a few other emergencies that could apply, and once in a while I get up early to go fishing. If none of that applied I wouldn't care if my neighbor borrowed my car.
I intentionally leave my internet access point open in case someone driving down the road needs to stop and check email. I'm trusting here that nobody abuses my open access to use all my bandwidth (and I'd shut things down at the first sign of abuse). So far that has not been a problem, and it may have made life easier for someone. Of course my neighbors all have (and should) their own access so they are not using mine - the big pipes on the internet need to be paid for.
The latter may sound like socialism, but it different. I provide the access, at my cost, and I'm free to not provide if anytime I don't want to.
Published: January 1, 2008 10:39 AM
david
MA Clem said
'.....and that good music will still sell cd's even if there are free downloads available.'
..and therein lies the rub. Its the same with the printed word, as Jeffrey has shown in prevous articles if memory serves.
If the work is good enough, electronic availability will support hardcopy sales.
If its not good enough, the writer/performer is constrained to get the money in before allowing the consumer to see the content.
so the cynical view is that writers/musicians who object to free electronic distribution are those whose stuff isn't good enough to sell itself on its own strength.
Published: January 1, 2008 10:55 AM
Christopher Hettinger
The way I look at it is that orchestras play Mozart, they did not write the music, but people pay for their SERVICE of performing it. In a free-market of music, would not the best (or at least best marketed or popular) performance of Ein Klein Natchmusik be the one with the most sales while still allowing those who prefer to listen to the London Symphony Orchestra over the Berlin anyday.
Now as for sales, I would think that the people who were going to buy a CD would just buy it; but the people who were on the fence about the purchase may just get a pirated-copy. Now, I would think the word of mouth would eventually result in MORE sales.
Either way, most bands make their money from concerts; so the free downloads would only further popularize their efforts. If anything, if the Music "Industry" wants to make sales, they need a radical new business model.
Published: January 1, 2008 4:42 PM
jeffrey
The point about quality is a good one. At some point, there will be a case for being suspicious of any group or publisher who doesn't provide the text or music online for download. Those who truly do have a good product to offer should fear nothing. Quite the reverse.
It takes guts and confidence to make a free sample available.
Published: January 1, 2008 5:49 PM
E Buck
I think this is a case of testing the waters...Radiohead (and soon others) are looking toward the future. Today, I think we Americans consider something bought as something "genuine". I am not sure that will hold up to future generations; hence, marketers/producers need to explore channels for delivery. I grew up buying cassettes, then CDS, and now I have an i-Pod for downloads ($.99 a piece & I can pick and choose!)...who knows how my son (aged 17 months) and future generations will purchase?
I think this is more of an experiment on Radiohead's part. Today it has a marketing slant to it, but perhaps a decade from now it's the status quo for delivery. And I think the marketers/producers (increasingly outing the middle man through technology & direct delivery) behind this example are taking a sample of today, then, later, will take another sample, and so on.
Published: January 1, 2008 9:49 PM
Michael G.R.
"In Rainbows" is currently #1 in "music" on amazon.com
Published: January 2, 2008 12:41 AM
Old Hop
If I'm not mistaken, Wilco streamed its Yankee Hotel Foxtrot album on the Internet for months before the hardcopy release, and it turned out to be their biggest seller to that point.
Published: January 2, 2008 6:27 PM
Gustavo Sosa
I buy books even having the pdf version, and I also download books even when I have the paper version, because I use them for different purposes. The electronic is for working in the computer and the paper to enjoy the reading in my living room or using it in classroom.
However, if you can download a music album and burn it into a cd, why would you buy the market cd?
Unless the record company adds value as pics, lyrics, a video, secret songs or stuff like that, I find no rational reason for buying the original cd to replace the burned donwloaded. There is no diference between one and the other.
Musicians have been giving away their records for free for years, because they make much more money in concerts than by selling records and so they need to be known for as many people as possible.
Do you understand my question? Why would I buy the cd at the store if I already have a copy at home?
Published: January 3, 2008 8:35 AM
martinf
Gustavo,
I think you got the point: "Unless the record company adds value as pics, lyrics, a video, secret songs or stuff like that"
Including DVD videos, lyrics and stuff like this is what many musicians are doing nowadays. Music companies have to adapt to new conditions and I'm sure that's possible. We can't imagine how far technology and innovation will be in the future. The role of good entrepeneurs is to satisfy a changing demand. It's hard to do that, and I think that's why businessmen try to influence politicians in order to create protection to their products. It's mercantilism
In spite of that, I don't personally buy music CD's, but I know many people who do it, although they've already downloaded from the Internet. As Jeffrey said, a digital download is not the same good as the original CD.
Published: January 3, 2008 10:16 AM
Michael A. Clem
While very close, a burned cd is still not the same as a professionally pressed cd. Burned cd's can have problems that pressed cd's don't.
Published: January 3, 2008 11:19 AM
Sasha Radeta
Jeffrey said:
"One relates to copyright, the mercantilist law that forbids the perfectly peaceful action of spreading around a good of infinite supply, whether that good is a sequence of notes or an arrangement of letters or pixels in an image."
That is an inaccurate description of copyright. While indeed a mercantilist law (it happened to emerge after printing and efficient copying was invented), copyright serves as a completely different purpose.
Copyright serves to prevent unwanted use of someone's property, such as book, CD, etc. What constitutes an unwanted use is defined by IP laws, but even in their absence, the authors could contractually limit the use of their goods by other people. These goods are finite and scarce due to a larger demand than supply when price is zero (the scarcity makes them "goods" by definition).
It is a lie that a regular person cannot currently obtain the full ownership right of a music CD. Such "immunity" to copyright costs a lot of money and most of us can only afford to purchase a limited use of these products (service). Unfortunately, some criminals - who only pay for such limited use - just hijack the product's exclusive rights (withheld by the author). The libertarianism should be the last place where they could get any support.
Published: January 3, 2008 5:45 PM
STUDIO
---"While very close, a burned cd is still not the same as a professionally pressed cd. Burned cd's can have problems that pressed cd's don't."---
True and False. Data burned off a glass master onto a commercial CD is more resilient to abuse and error rates than homebrew and prosumer devices. That data that goes on them is exactly the same. It makes no difference. After mastering to 16/44.1, what that data goes on makes no difference. A wav file is a wav file. Although when that file is copied again and again, there is a miniscule error rate, you are not going to hear it. It's compression through formats that is the sound killer. As well as bit truncating.
---"Copyright serves to prevent unwanted use of someone's property, such as book, CD, etc. What constitutes an unwanted use is defined by IP laws, but even in their absence, the authors could contractually limit the use of their goods by other people. These goods are finite and scarce due to a larger demand than supply when price is zero (the scarcity makes them "goods" by definition)."---
Which brings up good points. Copyright also protects the artist from corporate interests. Keeping some shoe company from using your catchy riff to sell their mass produced garbage and making you a sell-out in your fan's eyes. IP keeps that, and through contracts, allows that to happen. The problem is that most bands/artists who have a major contract, sign over their ownership of their rights. That's the biggest problem, which is ignorance, manipulation and greed.By the way, Apple is as greedy as they come. If you don't believe it, go ask David Byrne or Weird Al.
One could also compare values of gold and music. The attributes of gold and, say, music on CDs. Is music valuable? Does it hold it's value? Is it a store of value? Well, it takes money and effort to create the end product, just like gold. It is easily divisible, just like gold. Thanks to digital, it now holds it's quality and doesn't deteriorate, just like gold. But, it can be easily counterfeited, unlike gold. So there lies the problem. Presently it's a trade off between marketing, convenience and protecting sales of the end product.
We also have a generation that has not had to go through the transition of analog to digital production. They have never had to go through tapes, records(although still popular, because of hiphop and dance) to cd's and compressed(mp3) music. The present is all they know. They never had to deal with the initial poor quality of CDs compared to records and 8track, which eventually was overcome through better technology. Or the extreme initial cost of equipment which is next to nothing now. We also have a format that is well over 20 years old and still overpriced to an extent because the big companies were greedy and ignorant to open up standards and actually agree on something. We should all be listening to 24bit 96k music right now; not mp3s.
It really is a wonder to me sometimes why I spend tens of thousands of dollars on vintage and high tech gear that is able to run at 24 bit/ 192k rates, and capture quality better than anything tape ever did,only to have it bumped down to 16bit/44.1 at the end, at best. Then the kid bumps it down to crappy MP3 at 192, at best. While listening to it with crappy earbuds, crappy chinese made home systems or in crappy car systems.
We live in a consuming society, that is a producer of almost nothing except hype, that attributes value to almost nothing. Everything is disposable. That's why everyone will suffer. Artists are generally poor living paycheck to paycheck. When they can't protect their end product and it becomes disposable, expect the quality to go down and many to decide it's not worth it to produce any work outside there closed community, because that's all they can afford to do anymore. With the advent of online distribution and rock bottom prices on production gear, there is a deluge of bad music everywhere on the net. It has created so much static that it makes it tougher for anyone with talent to get noticed (MUSIC INFLATION - dilution of talent). It now takes so much more work to create a buzz. Yes, there are hundreds of more outlets to get noticed now, but there are hundreds of thousands more people trying to get noticed in those outlets combined with more marketing garbage. It is now a long tail challenge.
Thanks to high energy costs, you are gonna see small tours go down once oil goes above $100. They will stay regional at best.
Either way you go with this, the point is, the artist is still suffering and I don't see anymore rich people coming out of this besides lawyers and corporations.
Published: January 3, 2008 9:56 PM
Matt Hogan
Personally, I think a big portion of pirating music has to do with the availability of music. Let's be honest, some music is harder to find than others. Some people, after spending a day looking for that particular album at Best Buy, Tower Records, and every other music store get tired of looking, which leads to a quick google search for a torrent of the album. Likewise, overseas music is oftentimes hard to obtain, and if it is found instates (or even for sale online) it's substantially more expensive than your typical album. Once again, the torrent seems to be the choice of preference due to easy access.
What Radiohead has done here is something everyone should seriously consider doing. Maybe not with their most current record, but their previous records or something. Let's say, a music artist, after releasing three albums, decides to let consumers download his first album for free (it's been out the longest, and sales most likely have gone down after a few years). This gives new listeners a chance to hear the music, and from there they can make a decision to buy his newer albums. Downloading of music isn't going to go away. Soon, the successful artists will be the ones that can make this age of downloading work for them instead of against them.
Published: January 21, 2008 2:26 PM