Category: Business

Pretty Independent Machine: Songs as Promotions

TechCrunch vs Profy.Com This Tuesday’s post about NIN and Radiohead going independent has been on my mind. So here’s a part 2.

Now, I’m not the biggest fan of current CD prices. I don’t think anybody is. So when I read TechCrunch articles like Michael Arrington’s “The Inevitable March of Recorded Music Towards Free“, I’m filled with glee.

He’s basically arguing that the economics of recorded music will eventually drive all music to be free.

His argument has been met with some criticism, however, most notably from Paul Glazowski of Profy.Com. Glazowski argues in his post, “TechCrunch’s Founder Says Recorded Music To Eventually Be ‘Free’; Here’s Why He’s Wrong“, that there is still a cost to recording music, which will prevent it from being completely free.

This discussion got me thinking. If digital songs become free, how will that effect musicians? Listeners will love it because, hey, who doesn’t love free stuff? But how will it effect the livelihood of professional musicians?

As I understand it, a musician makes money from:

  • Album & song sales (CDs, iTunes, etc)
  • Live performances
  • Merchandising (t-shirts, posters, etc)
  • Commercial licensing (using your songs for commercials)

Not all of these provide income at the same levels. I don’t think there’s a common ratio, but album sales generally account for a small percentage, while the others offer more, according to Chris Arnold’s NPR article, “Band Tries to Make It Big Without Going Broke“.

So if songs become free, that shouldn’t gravely effect their livelihoods—since paid songs don’t effect their livelihood much already.

Also, if song distribution is no longer a means of revenue, its value changes. It becomes… perhaps… a new marketing channel?

Such is already the case in China, where music pirating has made profits from CD sales drop to zero, so writes Kevin Maney for USA Today in the article, “If pirating grows, it may not be the end of music world“, written in May 2005.

Yu Quan, like every music act in China, gets almost no income from CD sales, even though millions of its CDs have been sold. As soon as a CD is made, the pirates are on the street, offering them for a fraction of the retail price. Stores sell pirate copies. Legitimate CDs all but vanish.

So artists have to regard CDs as essentially promotional tools, not as end products. Yu Quan makes money by performing concerts, getting endorsement deals and appearing in commercials. If people hear and like Yu Quan’s songs on pirated CDs, at least they’ll be more likely to come to the concerts and buy what the duo endorses.

The primary revenue vehicles are now live performances, merchandising, commercial licensing—and even commercial endorsements and corporate sponsorships (though only the most popular acts can tout those).

So I agree with Arrington that the price of digital songs is being driven to free. But I don’t believe it’s just the economics of the situation.

My guess is that piracy and P2P networks figure larger in the equation than he thinks, especially since teenagers (and younger) are such prolific users. They are the audience of tomorrow; their habits now will lay the foundation for the landscape we’ll soon be facing.

A paradigm shift from looking at digital songs as promotional vehicles instead of income sources will also precipitate the drive to free. And this, in my opinion, is a good thing—especially for musicians, though maybe not record labels. If musicians don’t need a record label to package their CDs and market them anymore, what will they need them for, if they need them at all?

I think I have an answer for that, which I’ll write about tomorrow. (Ah, the suspense.)

Pretty Independent Machine

NIN and Radiohead So it begins.

Trent Reznor from Nine Inch Nails just announced that they are now an independent entity, apart from any music label or recording contract:

Hello everyone. I’ve waited a LONG time to be able to make the following announcement: as of right now Nine Inch Nails is a totally free agent, free of any recording contract with any label. I have been under recording contracts for 18 years and have watched the business radically mutate from one thing to something inherently very different and it gives me great pleasure to be able to finally have a direct relationship with the audience as I see fit and appropriate. Look for some announcements in the near future regarding 2008. Exciting times, indeed.

This is the second A-List band to do this. Radiohead‘s recording contract expired after their last release in 2003, and they never sought to get another contract. Then, just a week ago, they announced that their next album will be released as a digital download only. In an interview with Time Magazine, Singer Thom Yorke said:

“I like the people at our record company, but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say ‘Fuck you’ to this decaying business model.”

You can download their new album, In Rainbows, anytime after October 10. Also, you only have to pay whatever you want. That’s right: You name the price.

(Another small independent artist, a female vocalist, did this first, about a year ago. I can’t find her site or any info about her though. Anyone know who she is?)

It’s interesting to see these large acts go the way of smaller, independent musicians, such as Jonathan Coulton, who is one of the larger independent acts on the web. He’s most known for his songs Code Monkey, Baby Got Back (a Sir Mix-a-Lot cover), and Re: Your Brains. Coulton has a significant cult following and sells his MP3s for only one US dollar each. This, plus his live performances and various other projects, haven’t earned him a gold-plated Rolls Royce yet. Though, according to an interview with Quick Stop, Coulton says “…in some parts of the country, I’d be making a decent living.”

So being an independent musician without a record label or contract, what does Coulton think about all this? In regards to the Radiohead move, he writes:

I think this is a great move for them, and at the very least it’s an experiment the rest of us can learn from – I hope they’ll be forthcoming about the numbers they get. If I had to guess I’d say this plan will get the music to more ears, possibly generate less gross revenue on digital sales, but vastly improve their bottom line – their profit margin is going to be a lot higher than it would be with a label/distributor, plus this is likely to drive plenty more people to live shows and merchandise.

Exciting times, indeed.

Ideas from Ironic Sans

Ironic Sans Now for some Friday fun. David Friedman of Ironic Sans has had some great product ideas, and some not-necessarily-great, but oh-so-funny ones too.

Of the latter kind, here are my top picks:

Is this guy a genius or what?

Don’t Be a Cafe Wifi Moocher

Liquid Cocaine Know the term “moocher”? A moocher is, according to Urban Dictionary:

some one who uses you [for] there own good but never returns the favor.

Yesterday, I wrote about working in cafes. When I first started doing it, I admit I might have, well, sort of, you know, lingered over a table while nursing one small cup of iced tea the whole day. Yea.

Then one of my favorite cafes, Canvas in San Francisco, closed down. That place was frequented by cafe workers like me. Dozens of us would squat there for hours, while consuming a total of three and a half cups throughout the entire day.

“We were never able to make a decent profit” said one of the sad signs posted around the cafe. “So we’re sorry to announce that we’ll be shutting our doors. Thank you for your patronage.”

I don’t know what caused their shortfall exactly. High rent? Expensive supplies? Lots of debt? Or maybe… cafe wifi moochers?

The article “Free WiFi spawns cafe backlash” by Nate Anderson of Ars Technica sure seems to indicate cafe wifi mooching as a profit drain.

It was this problem that led one Seattle coffee shop to start shutting off the WiFi on weekends last year. Not only did revenue go up, but the atmosphere in the cafe changed as well.

The article also relates how cafe workers tend to make other patrons feel less inclined to talk, thus decreasing the sociability of the cafe. Personally, I go to cafes so there’s a healthy and lively level of chatter all around me. I try not to eavesdrop (though sometimes, it just sort of happens), but as a former New Yorker, I like the energy of being around lots of people.

But from now on, I’ll resolve to be less of a cafe wifi moocher and more of a consumer. I’ll still work in cafes, but I’ll make frequent purchases and chalk it up as my cafe wifi rent.

I’d encourage all other cafe workers to do the same too. C’mon, let’s pay our cafe wifi rent with more than just a small latte!

I Can Has $4000 A Week?

I m in ur internet cloging ur tubes Now for some Friday fun. As you may know (and silently feel embarrassment for me over), I’ve been not-so-secretly coveting lolcats, especially the site I Can Has Cheezburger?

Well, for you lolparty-poopers, did you know you can make about $4000 a week with lolcats? Yes! At least, according to the Unusual Business Ideas That Work blog:

Eric Nakagawa, a software developer in Hawaii, posted a single photo of a fat, smiling cat he found on the Internet, with the caption, “I can has cheezburger?” in January, 2007, at a Web site he created. It was supposed to be a joke.

This joke, which Nakagawa monetizes with advertising (or, should I say, loladvertising?), now brings in anywhere from $500 to $4000 per week.

While posting pictures of lolcats is fun, it’s hardly a scalable business if he has to find the photos, caption them, select the best ones, and publish them every day.

So Nakagawa intelligently built the ICanHasCheezBurger Factory, a tool that lets viewers submit their own pictures, caption them, and vote on their favorites. The most popular ones are then published on the main blog, while he gets to sit back and collect the money. Talk about automated lolgenius!

In fact, I know a friend who, during one sunny day, uploaded 2GB of photos. TWO GIGABYTES. Holy lolcat!

I don’t know how long the lolcat trend will continue. But if you look at how media and entertainment is going the way of niche markets, perhaps niche blogs like I Can Has Cheezburger and Cute Overload will be around for quite a lolwhile.

Globalism and Racism

Mister Wong There’s been some drama over the German social bookmarking site Mister Wong lately. If you’re in the US, you may be able to guess the controversy. If you’re not, you probably have no idea what could be wrong.

The controversy is over the branding of the site: it’s name, illustration, and slogan. 8Asians, a group blog of Asian American & Asian Canadian bloggers (of which I am a member) was the first that I know of to publicly decry Mister Wong. As written by Ernie, one of the founders:

Maybe people aren’t as sensitive to political correctness as they are here in North America. But seriously, one of their web badges has the slogan “ping pong, king kong, Mister Wong.” Which I, of course, interpret as “ching chong, Mister Wong” and get INCREDIBLY FUCKING ANGRY.

The first few comments were sympathetic. One commenter expressed some confusion though. “Enlighten me. What on earth is offensive about the Mr. Wong website?” he wrote. After a few back-and-forth explanations, the issue died.

Two months later, Kristen Nicole of Mashable wrote about how Mister Wong was launching a US version. In her review, she wrote, “Despite the questionable name, Mister Wong has a lot going for it…” A commenter there also expresses some confusion: “Kristen, can you explain why you think the name is ‘questionable’?”

Another commenter replied, “It’s not so much the name that is questionable, more the cliched stereotyped image of Mr. Wong that comes along with it. I really hope they get rid of that on the US beta at least, otherwise there’ll be some angry Asian Americans out there.”

Then Kai Tietjen, the founder of Mister Wong, removed the illustration from the logo.

It was never my intention, nor that of my company, to hurt anyone with the use of the illustration. We are extremely sensitive to this issue and the feelings of others. We removed the original illustration off the top of the page some time ago, when the issue first arose, in hopes that no one would be offended by it any longer.

Apparently the 8 Asians article and angry comments on Mashable’s articles led to this decision. A short time later, a German newspaper picked up the story and Germans flooded the 8 Asians site. Some politely expressed their confusion and defended Mister Wong. Others haven’t been as polite, unfortunately.

Pete Cashmore from Mashable followed up on the story and succinctly summed it all up:

These kinds of clashes seem inevitable when companies launch globally: what’s culturally acceptable in one place is a hanging offense elsewhere. Often, as in this case, people are puzzled by the fact that they caused any offense at all. The “racist” label, however, is one that all startups will want to stay a million miles away from, even if they don’t fully understand their infraction.

That’s the real takeaway here, especially for any business going global. You may not agree with the controversy, but once you operate in the global arena, you have no choice but to respect the sensibilities of all the societies with which you want to do business. Even if you don’t agree with or understand those sensibilities.

Remember the Jyllands-Posten Muhammad cartoons controversy? That’s probably an extreme example, but you get the point. A less extreme example is the Chevorlet Nova and how it didn’t sell in Spanish-speaking countries because “Nova” translates to “doesn’t go” in Spanish. This is actually an urban legend, but it’s a commonly cited example of going global.

Ernie, in my opinion, may have saved Mister Wong quite a bit of heartache and money by expressing his views at the early stages of their entry into the US market. For better or worse, the US society is relatively much more politically correct than other societies of the world. Denounce that all you want, but I guarantee you that if Ernie hadn’t spoken up, someone else would have.

Spies Like… Your Coworkers

“Oh. Uh, will you hold my wallet for me while I take the test, please? There’s a thousand dollars in there… or maybe there isn’t. Know what I mean?”
– E. Fitz-Hume

Spies Like Us I don’t know about you, but if I had the skills, the talent, and the looks to be a suave international spy like James Bond, I’d totally do it. But as it turns out, I’m more suited for the business world.

Perhaps Jami Miscik is too. She’s the former Deputy Director of Intelligence for the Central Intelligence Agency (CIA), most known for failing to provide adequate warning about 9/11 and delivering the news of Weapons of Mass Destruction (WMDs) in Iraq to the Bush Administration.

She’s now working at Lehman Brothers (LEH) as the Global Head of Sovereign Risk. Or, an “uber-analyst and seer”, according to CNNMoney.com. Is that smart?

Last fall, when North Korea’s nuclear test rattled global markets, the folks at Lehman were calmer than most; Miscik had forewarned them and explained how it could play out peacefully. Last December, when Venezuelan President Hugo Chavez’s brash reelection rhetoric was publicly dismissed as idle boasting, Miscik told the Monday-morning gathering, “He really means this.” She predicted an acceleration of his program to nationalize industries: “He’ll be doing things bigger, bolder, and faster than even his closest allies in government expect.” She was right.

In the eyes of her Lehman colleagues, she’s largely redeemed herself. “Her information is infinitely better than the information you can get anywhere else that I know of,” says Lehman president Joe Gregory. Adds Kathy Cassidy, treasurer of General Electric (GE): “She doesn’t bring notes and she doesn’t have charts! Everyone else who comes to see us has charts. But she doesn’t seem to need them.”

(BTW, I love that charts quote. “Everyone else who comes to see us has charts.” Ha! That’s such a corporate-world line.)

The contrast of the political and business worlds here is interesting. I don’t know exactly how responsible Miscik is, personally, for the 9/11 and WMD blunders. Maybe there were political influences involved. Maybe the wrong conclusions were drawn by the Bush Administration. Maybe… I dunno, pick your favorite conspiracy theory.

What is interesting is how the business world has embraced her expertise. Corporations are generally more efficient than political organizations. They are also able to take greater risks. Perhaps this means they are able to absorb, asses, and act on geopolitical intelligence better than governments as well.

“In government, geopolitical risk is a bad thing,” [Miscik] explains. “Here at Lehman, people are risk takers. They want to understand the situation and the smart risk to take, because smart risk is opportunity.”

What’s this mean for businesses? Maybe we should hire more spies. Or adopt some of the CIA’s practices (like in the book CIA, Inc.). That’ll probably be the closest I’ll ever get to being James Bond.