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Is Reznor Reshaping a Market?
by Paul Resnikoff, Publisher Digital Music News, March 4th, 2008
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Ghosts is a variation on a theme created by Radiohead.  The latest NIN album is part free, part paid, part digital, and part traditional.  And a broad range of consumer preferences and budgets are accommodated by the initiative.

Reznor and Radiohead are important market-movers and fearless risk-takers.  But are these experiments really relevant to the broader music industry?

The problem is that only part of the consumer population is going to play along.  Radiohead found that a disproportionate number of fans downloaded In Rainbows for free, an offered option.  But an even larger number of fans downloaded the album for free outside of the Radiohead page, on BitTorrent, P2P, and other sharing protocols.

These fans wanted the album on their turf, not Radiohead's.  And that has been the bigger story for the recording industry for the past ten years.  Sure, the iTunes Store has sold 4 billion downloads, but that is just a tiny fraction of the free downloads obtained from other channels.

Outlets like Limewire offer instant, on-demand bulk downloads and comprehensive recording catalogs for free.  The iTunes Store offers a cleaner copy, but for a price that makes collection volume difficult to achieve.

Now, Trent Reznor is about to learn a similar lesson.  Most likely, fans will grab the first, free volume of the album in heavy numbers, and a smaller percentage will pay for the expanded collection.

But that is only part of the story.  Outside of that sandbox, volumes II-IV will quickly creep onto Gnutella, BitTorrent, and IM.  Sure, Reznor seeded the first volume onto BitTorrent.  But who are we kidding?  Fans are in charge of this channel, not Reznor.

That means far lower volumes for NIN, or any other established artist, compared to the 90s.  Other factors are also sapping energy, including an increasingly-fragmented media market, and the lowered attention spans that come with it.

Then again, who needs 90s volumes when the major label is suddenly optional?  After all, Reznor can now keep the revenues (almost) all to himself, and achieve robust revenues on far smaller volumes.

The math is alluring, and a major disincentive for signing with a label.  Marketing specialist Seth Godin urges artists to cultivate targeted, niche audiences, and any business school graduate will lecture you on the value of consumer targeting.  Why not translate those principles and percentages into a healthy, more controllable career?

The question is becoming less and less academic, and artists like Trent Reznor are putting the possibilities into motion.  But it remains unclear if artists can healthily sustain themselves using this philosophy, at least in scalable numbers.

And smaller artists will have difficulty applying the Radiohead model, at least until their recognition grows. Why?  The reason is that most lesser-known artists have trouble getting people to download their content for free, much less pay for it.  Why pay for something blind?  That is a game for pre-2000 consumers.

In contrast, Reznor and Radiohead have established names, thanks to a massive, major label publicity machine.  That tailwind is a critical component of the current models - and a major reason why media outlets are focusing heavily on their initiatives.

In the middle are artists like Saul Williams, a poet and rapper that exists outside of the mainstream.  Reznor actually helped Williams create a Radiohead-like model with the help of Musicane, and the results were mixed.  Less than 20 percent opted to pay $5 for the album - a total of nearly 28,000.  Then again, that translates into roughly $142,000, a revenue total that easily pays the bills.

And any starving artist knows that six-figures is a goldmine for a life in the arts.  A major would drop Williams in a heartbeat after a performance like that.  But sailing solo, Williams could command a decent and consistent payout.

So is the Radiohead model relevant?  For more established, post-label artists, the concept probably maximizes recording profits, and creates momentum for other revenue generators.  And the results are boosted if the recordings are dispersed across a broad number of sales outlets, including the artist page, iTunes, Amazon MP3, and even traditional brick-n-mortar.

Sure, the result is smaller than 90s recording sales potentials, but it is something nonetheless.  And if the consumer elects to pay, they have the opportunity to do so.

What about everyone else?  For mid-size artists, the concept can translate into meaningful revenues, and for smaller artists, the idea is probably premature ahead of broader audience awareness.  But more than ever, artists have the potential to reach super-targeted audiences, and that greatly increases the chances of a paid transaction.


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Paul Resnikoff is the founder and publisher of Digital Music News (www.digitalmusicnews.com), a premier industry source for news, information, and analysis. Digital Music News has quickly grown from its humble roots as a small, executive news service to the most widely read information source in the field.


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