Friday, August 1, 2008

How labels could profit from Radiohead and NIN 'experiment'

I just got done reading an interesting economic article by Will Page and Eric Garland on whether Radiohead's "pay what you want" experiment was successful in attracting usual torrent users to the band's website. I'm a little cautious of the conclusions by Page and Garland of "yes, but with a twist" because ultimately, this is a very small sample size and because the novelty might have changed user behavior.

But the author's have a fantastic analysis in the form of a table comparing,, and torrent sites. The author make note of the various invisible costs to the users such as "attention costs", "privacy costs", and "quality of product". What if record labels viewed torrent sites, not as competition, but rather as base designs that could be improved upon?

As the authors' note, a large number of people still went to torrent sites for illegal downloads even though offered the same thing, but free and legal. They conclude this is because people will ultimately keep their buying habits steady unless they have a benefit to gain from switching (clearly, legality alone is not enough). Why can't labels cash in on this?

Why could labels not offer similar sites and offer additional content? Imagine a completely different type of business model: instead of collecting money from consumers, collect them from the artists. One of the problems with a future like the one advocates is that I would have to go to a bunch of different sites (one for each artist) to obtain music. Labels could offer an "online free supermarket" of music. In addition, targeted advertisement could be done in a similar way as iLike and Amazon (e.g., "we've noticed that you like Band X, did you know that Band X has a show scheduled near you? Here are some T-shirts you can buy"). Artists would pay to have their music on these sites, sell shirts, etc. Recommendations would be made in addition. One day, oh one day, we'll have

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