A New Business Model for Intellectual Property: The Buyer Picks the Price

Are we approaching a yet another new era for the distribution of copyrightable works to the mass market?   Radiohead, Prince, Peter Gabriel, and Paste magazine may be at the forefront of a new business model for the distribution of creative works. 

In recent years, the music industry has seen CD sales decline as users opt for digital distribution (iTunes, eMusic, etc.) or subscription-based services such as satellite radio or Rhapsody.   Digital distribution can be lucrative.  U.S. copyright law provides artists and composers with royalties for public performance of songs by digital audio transmission, and the more that users select a particular song “on demand”, the more royalties that an artist can receive.  In addition, other revenue sources — such as concerts, endorsement fees, and placement of songs in other works — are often much more valuable than CD sales. 

In order to drive consumer demand for what were once ancillary revenue sources, several musicians are using creative ways of getting their work into listeners’ hands.  For example, Prince recently gave away free copies of his new CD Planet Earth to everyone who purchased a Sunday edition of a British newspaper The Mail.  The newspaper paid Prince an undisclosed amount for the promotion, and the publicity gave Prince a spike in sales of his older CDs in England.  Peter Gabriel similarly gave away a “rare tracks” CD in the same newspaper to promote his upcoming concerts.   Finally, in the latest distribution model, progressive rock band Radiohead released its new CD In Rainbows as a digital download using a system where fans can pay whatever amount they choose.  Wired magazine reported that on average, fans chose to pay between $5 and $8 for the download, although over half of the downloaders opted to pay nothing.

The new model isn’t limited to music.  Here in my hometown of Pittsburgh, several regional interest magazines recently began publication, with free distribution to targeted readers whom advertisers crave.  Indie music-and-film magazine Paste is also running a “name your price” promotion for a one-year subscription. 

Are artists and media outlets creating a consumer expectation that all new products will be free?  If free distribution brings results from other revenue sources, that may be a model that benefits both artists and consumers.

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