Why Selling Music Still Matters… and Free Means Paid

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Does selling music still matter?

Payouts on downloads are paltry for most artists, and the broader format appears to be hitting a plateau.  Meanwhile, CDs are continuing to plummet.  That raises the question of whether artists are smarter to give away their recordings, and focus on more lucrative areas of the value chain.  Instead of charging 99-cents for an MP3, why not charge $9 for a t-shirt, and $29 for a concert ticket from a stronger flow of fans?

Of course, from the non-diversified label perspective, the recording is an all-important component of the business model.  The answer for everyone else depends on the artist, audience, and objective in question.  But most of the time, it makes sense to fuel a wide range of formats and outlets, including free and paid downloads.  “The old music business had one kind of consumer, and one kind of business model,” explained Scott Cohen, cofounder and vice president of International at The Orchard, during a discussion at Popkomm on Thursday.  “Now, marketing and promotion in the digital world is far more sophisticated, and there are a myriad of pricing, business, marketing and promotional models.  Some consumers just want to buy from iTunes, others want it for free, others want it from Napster, others want it from MySpace and YouTube,” Cohen relayed, rattling just a few of the marketplace options.

That throws one-format pony plans out the window.  Instead, savvy artists and labels are positioning music downloads within a far broader portfolio, and accepting piracy as part of the plan.  “The industry itself has put piracy front-and-center for everybody to focus on,” said Kevin Arnold, founder of digital distributor IODA.   Instead, voices like Arnold and Cohen are urging artists and labels to embrace everything, and that means traditional CDs, paid downloads, and giveaways.

But they are also mixing free and paid on the same content.  “It used to be that you gave away a free track to sell the other stuff, like the album,” Cohen shared. “Now, when we give away a track, that track sells more.”

Sounds counterintuitive, though the marketplace supports the assertion.  On a massive stage, artists like Coldplay have seen big a-la-carte numbers even after giving away the same content for free, and a string of superstars (Lil Wayne, Usher, Metallica) have performed solidly despite serious, unauthorized leaks.  But those that proactively position free content gain the benefits of registration information and critical feedback.

Those are ingredients for a deeper, more engaged connection with fans, a critical aspect of successful marketing strategies.  Some artists like Radiohead enjoy massively-connected fan relationships, while others are just starting the process.  Either way, panelists agreed that artists carrying a strong connection with their fans gain more in the marketplace.

But given the broad portfolio of configurations, is release windowing still a viable approach?  Hollywood is famous for its fine-tuned, successful windowing approach, though the recording industry never excelled in this category.  In the digital realm, the concept seems even less viable, and traditional windowing approaches are getting destroyed by the instant-gratification of the web.  Still, groups like Radiohead are experimenting heavily with windowing concepts, across both digital and physical arenas.

Others are also mapping sophisticated strategies that span an exhaustive range of assets.  Oke Gottlich, founder and managing director at digital distributor Finetunes, is one executive backing an involved windowing approach, one that easily spans a dozen formats and outlets.  “You have to think about how to make the life of your product longer,” Gottlich explained, while encouraging artists to create different song versions and format variations.  “You will see an increase in sales,” the executive assured.

Report by publisher Paul Resnikoff in Berlin, who moderated the panel discussion.