Think & Play
Thoughtplay is the creative team behind various popular websites and other projects. At this blog we give away bright ideas regularly, and comment on interesting trends both online and off. The thought channel is for more business-related trends, play looks at entertainment and leisure, and thoughtplay introduces our own creative ideas, as well as news about our projects.
Can the music industry learn from goats? | 161206
Jonathan Rosenberg's webcomic, Goats, recently celebrated its 2000th edition. Rosenberg is to congratulated, not only for the longevity, originality and humour of his comic, but for the fact that he has been able to effectively monetize his creation - since April 2006 he has been able to support himself solely from the proceeds of advertising, book and T-shirt sales generated by the site. Goats is not unique in this respect - John Allison has been making a living from Scarygoround (the best and most popular of the UK webcomics) for several years now.
What is significant about a couple of artists earning a few thousand dollars a year from their websites? For a start, they are making reasonable incomes - at the beginning of 2006 Allison was worrying on his blog about the need to pay VAT. VAT is a UK sales tax which is only incurred by enterprises with revenues in excess of 61,000 pounds ($120,000) a year (but is applied in an irritatingly complex manner to businesses that sell books (zero VAT rated) and export items (don't ask)). Given the relatively high margin on the products he sells it is clear that Allison makes a reasonable, though not excessive, income from his art. More importantly, these sites give away their content to users for free, relying upon ancillary sales for their income.
All well and good, but what has this got to do with the music industry? It is clear, except to the most self-deluding of music executives, that the conventional model of music sales isn't going to support them for ever - pesky file sharing applications like Limewire and Bit Torrent are ever more popular, and social filesharing (burning a CD of MP3s for your friends) is increasing massively.
To date, record companies have put most effort and resources into (failed) attempts to stem this tide - so why haven't they looked at alternative revenue models? The answer is one of ownership - a record label will own the rights to a track or an album, but the artist or group will own the rights to merchandising their name and image. This is great news for the band, who might make $1-$2 from an album download sale, but more like $10 from selling a single T-shirt. To apply a crude rule of thumb, a band could therefore make as much money by giving away their music free and selling t-shirt volumes equivalent to 10% of what their album sales would have been as they could by issuing a conventional release.
The main problem with this model is that it generates no revenue for the record company which has expensive marketing campaigns, well remunerated executives and shareholder dividends to fund. Of course, if a band is giving away its music for free then there isn't really any need for marketing, executives and shareholders - the only cost that need to be covered is the production of the album, which the band could fund independently. Where do the record companies fit into this model? Err, they don't...
It would be churlish to dismiss record companies so readily - many have highly creditable histories of nurturing new artists and bringing them to public attention - but in this web 2.0 world of Myspace and social networking they find themselves increasingly chasing new talent rather than developing it.
Realistically T-shirt sales alone aren't going to support album production and leave a healthy income for the artists. You can however add to this mix the add sales of CDs (some fans will always want the physical item) and bundling bonus items that are harder to file share (like DVD concert footage). Add the revenues from touring and you have a much more compelling proposition. There is however a final hurdle to overcome - music artist websites are surprisingly unpopular given their media profile.
Coldplay, the biggest band in the world in 2005 (by sales) consistently trails Scarygoround in online popularity stakes. Of course if you could get all of their tracks for free from the site, this situation would change significantly, but it would be a brave (and legally tortuous) step to take.
At Thoughtplay we think that there might be another alternative, but we'll talk about that in a future blog post.
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