For most bands the answer to the question of giving away free music will at some point be “Yes”. But, that answer is not the best answer for every band all the time. To make the wisest decision about giving away free music downloads we need a better understanding of how “free” works and how it affects our ministry.
What is the Economics of FREE?
Lately we have been hearing more and more about “the economics of free”, especially in reference to music. Chris Anderson made the term “the economics of free” famous in his article in February of 2008 in Wired magazine, Free: Why $0.00 is the Future of Business. He followed up the article with his books “Free: The Future of a Radical Price” and “Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing“. Followed by another article in the Wall Street Journal called The Economics of Giving it Away. These are all very interesting reads for those of us who like to understand the big picture of how technology is changing the economy and even how we view economics.
For the rest of us: the basic premise is that every industry that becomes digital eventually becomes free. We have already seen examples of this in music and book sales with album sales changing to free downloads and physical books changing to free e-books. Years ago, almost every industry including the creative arts made money by selling physical products for a higher price than what it cost to create those products. The challenge now is how to create new products and business models that allow us to make a profit from free. This challenge sounds impossible because we tend to still think using the old business model of selling physical product, but profiting from free can and is currently being done. First, we must change the way we look at how to make money.
Free and Music Ministry
The economics of free affects Christian musicians both more and less than secular musicians. All musicians have lost income from music sales. This has particularly hit the record labels hard, resulting in them signing fewer new artists, giving less tour support and taking a bigger chunk of the artists’ income from other sources in their effort to stay afloat.
Historically, Christian musicians have experienced quite a bit more of the economics of free because we have always been expected to give away more products and services than our secular counterparts. We have been expected to fund our own music ministry by donating our time and our services, paying our own gas money, equipment purchases and repairs etc. Fans expect free (or at least extremely low priced) concerts because it is considered to be a ministry, like church. But, people donate money to churches and not to Christian bands. Churches expect free musicians and concerts because they are a nonprofit organization that is funded from donations and use volunteers extensively. Even a national act is not able to charge as much as they could if they were a secular band. Then, concert goers expect free merchandise from the band as further ministry to them. Typically, Christian musicians have sold fewer CD’s than secular musicians because the market within each music genre is smaller. So, losing music sales to free digital downloads affected us because we had so little income in the first place. Christian musicians have struggled for years with how to fund their ministry within the church economy of free.
So, how do we survive and thrive in the new economics of free?
Not everything can be free.
Yes, that statement is overly simplistic but it is also very true. Generally, musicians are not money oriented people. In our hearts, we constantly wrestle between giving away everything from our ministry and struggling to pay the bills. We would give it all away for free if we could. Still, we must be able to make money on something in order to continue to do our ministry.
The trick is to have the right products available for free
or for sale at the right price and at the right time.
What should be free and what should be for sale?
Bobby Owsinski (in his book “Music 4.0: A Survival Guide for Making Music in the Internet Age (Music Pro Guides)“) says that there are 2 kinds of products: infinite and scarce. In our application, infinite products are readily available to the public, easy and inexpensive to duplicate and share, and out of our control to limit. Scarce products have limited availability to the public, are difficult or too expensive to duplicate and share, and we have the ability to limit the product. Most often scarce products are highly personalized, which makes them even more valuable.
By using these guidelines we can determine that, especially for those of us with a younger target audience, digital downloads are an infinite product and autographed band t-shirts are an example of a scarce product.
We can apply this way of grouping products to everything the band produces including: videos, recorded music, live music, website content, t-shirts, stickers, photographs etc. We can then use this grouping to determine which of our products should be free and which should be for sale. Notice that the groups are not determined by how much the product originally costs to create but by how our target audience is using them.
Making a Profit from Infinite/Free Products
Infinite products should generally be given away Free as part of a marketing plan. We are not saying infinite products should be given away haphazardly or because it is easier than fighting pirating. What we are saying is don’t bother to fight what you cannot control—instead, use it and even encourage it to get your message out and market your other products. When you give something away free, do it in a big way, as loud as possible to reach as many people as possible. Use “free” to increase your fan base.
For example: What do you think might happen if you gave your best song away free and then encouraged your fans to share it with other people by rewarding them with another free song? What if the second free song is only available exclusively to fans who shared the first song with 10 other people? I’ll bet your fan base would increase and the amount of live shows you are able to book would also increase. Then, if you sang the exclusive song at gigs and explained that it is only available to fans who share the first song, your fan base would increase again because everyone wants to be part of your exclusive group.
Free products make scarce products more valuable
if they are used to make your bands brand more popular.
For example, which is more valuable: a limited boxed set edition of the directors cut of the Lord of the Rings trilogy signed by all the lead actors and actresses or the same type of DVD from a movie you never heard of that failed miserably at the box office? The popularity of the Lord of the Rings makes it a valuable collector’s item, the other DVD is a coaster or material for a craft project at best.
Sell scarce products such as backstage passes, limited edition boxed sets of CD’s or vinyl, signed merchandise. Base the prices on how exclusive and how personalized the product is. Of course, you must take into account the cost of producing the product when determining the price. But today’s market is based on perceived value rather than cost of production plus profit margin. So, ideally we want to take the cost of production into account before we decide if we should create a product.
For example: An indie band is considering producing a physical CD.
In the past we would have estimated how many CD’s we think we can reasonably sell (say 500) and then estimated the dollar amount we think we could get for each CD ( $10) to come up with our best guess at the total amount of income we could expect from CD sales ($5,000). If we could keep the expenses of creating the CD down to about half of the expected income ($2,500) we would probably go ahead and pay to make the CD (knowing that we had a profit margin that allowed room for overestimating the number of CD’s we could actually sell and underestimated the actual costs of recording and manufacturing the CD).
But now the same band now would probably not sell 500 CD’s. Instead we would be expected to give away free downloads even though our recording costs remained the same. Additionally, the costs of manufacturing each physical CD would probably go up because we would not be able to take advantage of bulk pricing. Should this band still produce CD’s? Maybe, if they can increase the value of each CD by making them a scarce product—limited and exclusive (like autographed by the band and sold as part of a package which includes personal access to the band through back stage passes). When the CD’s are combined with other products that do not cost the band anything but increases the exclusivity of the entire product, they can be sold for a much higher price per unit. This higher price per unit makes the entire CD project profitable. But if the band is not well known enough to be able to build in any kind of exclusive offers that people will be willing to pay extra for, it might be better to wait and focus on producing one or two songs that can be given away free as a video or digital download to build a stronger fan base before recording an entire CD.
The idea of using free as a marketing tool is to build a strong fan base so we can charge more for scarce products. But a scarce product is not valuable only because it is scarce. A scarce product is not valuable because it cost more to produce than another comparable product. A scarce product is valuable because the supply is limited AND there is a demand or desire for it. Create that demand with by marketing free products.
Timing is Everything
Three things are true:
• the time is always right to increase your bands fan base
• the time is not always right to spend money
• the times will always change (hopefully growing better if we do great marketing)
So, whenever you can create a reasonable quality product at no cost and give it away free you should include that product in your bands marketing. But spending money by creating product that will be given away free must be done with wisdom, and only as you can afford it. Spending money to create a scarce product is wise, but only after good marketing has created a demand for that product.
How we spend money to create band products has changed with the economics of free because now singles are more important than full length CD’s and building band name recognition is far more important than marketing our latest CD. When we spend money to create band products has changed even more because we no longer need to record a full length CD to get a band started and create a stir. So, we do not have to invest thousands of dollars up front. The economics of free has made it possible to bootstrap our way up with a lot of marketing savvy and very little financial investment.
And so, should you band give away free downloads?
Is free part of your marketing strategy to build your bands brand and band name recognition? Then, yes.
If not, go ahead and make whatever money you can by selling your songs.
Here’s the books I referred to, click on the book you are interested in for more information from Amazon.
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