Nine Inch Nails: $1.6 Million In First Week Online
How much of that $1.6 million will go to a record label? None -- Trent Reznor released the whole thing by himself.
See Also:
Radiohead: 1.3 million downloads (But big music not dead)
How Much Did Radiohead Make? It Doesn't Matter
Radiohead Selling Real Copies Of "In Rainbows" For Real Money
Radiohead Not Doing "Pay What You Like" Again?
Radiohead: Our Fans Aren't Cheapskates
Still, it's very encouraging to see the profit of 800,000 orders go directly to the artist.
It remains to be seen how this model could work for up and coming artists and niche groups.
but lets see. $1.6MM from 800,000 transactions = $2/transaction
Trent may behumming to himself that fab tune by Cake:
"How do you afford your rock and roll lifestyle?!?"
Which, I might add, for Trent is probably nearly 95% of the entire purchase price.
This is an interesting evolution of the pricing model: give away some free and then have premium versions that folks are willing to pay for, and have it blend out to an ok number. And while the total dollars might be smaller than the old days, his net cut might be just as high.
The $5 download will have a very low COGS as it is all digital, and likely also a very popular option.
You're right - COGS is definitely not zero. Not only do we have to account for transaction fees etc, but we also have to figure that this mandated quite a few server infrastructure upgrades as well to handle the load.
I remember when In Rainbows came out by Radiohead - their server was bogged down for quite a while and they only had 1.3 million downloads TOTAL. Trent surely had to invest in beefing up the nin.com infrastructure to handle that additional load.
Even with all the COGS figured in to the equation, this is a serious win for Trent. He gets nothing but great press for this and STILL manages to make money!
Courtesy of Bob Lefsetz:
Ghosts I-IV on 2 audio CDs.
A data DVD with the multi-tracks so you can slice and dice at home.
A Blu-Ray disc with hi-res audio.
A book of photographs.
A book of art prints.
And the right to immediately download the MP3s.
And, and this is the kicker, each package is numbered and personally signed by Trent Reznor.
COGS is not zero, as well noted above. But for argument's sake, lets say total COGS plus total operating expenses (but not including any costs for Mr. Raznor's own time) are $600K.
(Its got to cost at least $100-200K just to arrange and record and master the music, no?)
So Mr. Raznor clears $1.0MM.
Then the issues are:
1. How does that sum compare to what he used to make on an album (produced and distributed thru conventional means)? Is this a better or worse economic deal for the artist? (I guess WORSE.)
2. Regardless of #1, is that sum what an artist of Mr. Raznor's accomplishment and reknown can now expect (hope?) to yield from an "album" (or whatever we will now call a music artists occasional large-scale output)? (I guess Raznor is so talented and well known -- and so cutting edge and early, business-wise, that this yield will rarely be equalled.)
3. How many "albums" can an artists reasonably release and maintain that level of yield? (I guess FEW.) Freed from the grind but without the scheduling/marketing/promotional machine of a record company, will artists inevitably overproduce and saturate their markets and fade quickly? (I guess YES.)
4. Does the artist have the resources to finance the whole thing him/herself? (If not the record company swoops in as before and the model reverts to traditional artist yields.) (I guess this will happen OFTEN.)
Anybody differ?
Also, when calculating COGS to compare conventional vs online distribution, let's exclude expenses that would have been incurred either way such as studio time unless the record label pays for ALL of these types of expenses. Actually, in Trent Reznor's case, I believe his studio is actually in his house. Furthermore, since there are no vocals on this CD, I'm guessing that whatever he had set up in his house was sufficient for the album.
So I think we should only include expenses that are specific to online distribution or otherwise incurred because of ditching the record label.
Who helped Trent, and Radiohead, and Prince, and the Eagles, every other established act that's going label-free get established? The labels, with their once-powerful distribution and marketing levers.
-He records and produces everything himself (already doing this for love , not money, i thnk he doesn't "bill his time" mentally when making music)
-Owns his own studio facility
-Owns his own recording equipment/hardware/instruments (which was procured with funds paid to him by a label)
Of course this is not the case for most artists.
But, the label at some point paid for equipment. I personally know two medium sized formerly "indie" rock bands who have taken label advances or recordind advances and instead purchased equipment which they will own outright, forever. Barring computer and software upgrades, they will be able to record many albums or singles with the equipment. If the label goes away, they will still ahve the equipment. Of course , there is the cost of other "people" talent - recording engineers/assistans, mixers, perhaps a producer. In the end though, a creative artist/musician values paying for these people and will eat the costs in order to make their artwork shine. I cannot see this NOT being a trend for many bands...