Reznor makes $750,000 even when the music is free

Trent Reznor of Nine Inch Nails made headlines again this week as he released his new, four-part instrumental album Ghosts I-IV, at a variety of price points, including a $300 super-deluxe package. He's also giving away Ghosts I at no charge, even throwing the tracks up on The Pirate Bay for anyone to download. And it appears to be working quite well for Reznor, who has managed to sell all 2,500 copies of his $300 package without major label backing or much in the way of splashy marketing. If Reznor's earlier experiments in digital distribution failed to recoup their costs, he's clearly learned his lesson: grossing $750,000 in the space of three days isn't a bad haul for any businessperson.

Reznor was disappointed by an earlier experiment in which he released the music of his friend Saul Williams. That album was available online either for free or for $5 (for a higher-quality version). Under 20 percent of downloaders paid up, and Reznor complained that he couldn't even cover his costs for producing the album.

With Ghosts, Reznor had some obvious advantages. NiN is a better-known brand with a devoted following, and Reznor's strategy of using multiple price points made his music easily accessible to fans. Those who wished to pay nothing could download a free version of Ghosts I. For $5, a digital version of all four albums was available, and for only $10, fans could get all the music on CD along with an immediate digital download. $75 and $300 deluxe versions were also made available and include things like a Blu-ray disc, a DVD of the multitrack audio files from the project, videos, deluxe packaging, and more.

Can a ghost make you a millionaire?

For all the talk of Reznor "pulling a Radiohead," though, the actual strategy was different. There is no "choose your price" component, and there is no free download of the complete project from the NiN site. Instead, Reznor's strategy is more akin to the "free sample" model. It's also an attempt to move beyond the music biz's long-term fixation with a single product, the CD. Reznor is using five price points to segment his offerings, and the extra work this required appears to have paid off.

In covering the story, the New York Times noted that "one option Mr. Reznor is not offering fans is a way to obtain the entire collection free," but Ghosts I-IV is licensed under a Creative Commons Attribution Non-Commercial Share Alike license that does allow noncommercial redistribution.

Even without a major marketing campaign, the album release generated so much interest that the NiN servers were knocked offline. Reznor apologized to fans, saying, "Sorry again about the hassle. Somebody kicked the plug out of our internets, but we're all set now."

Reznor gains something valuable from every transaction, even if downloaders elect not to pay; he harvests the e-mail addresses of fans interested in his music. These addresses are obviously marketing gold, but Reznor makes sure to treat his fans with respect, even when asking for their information. "We hate spam as much as you do, if not more so," he writes.

While it's routine now to hear media execs talk about how "people want to do the right thing" when it comes to paying artists, those comments are generally followed by a defense of lawsuits, DRM, and ISP filtering plans. The thinking goes that even in a world in which all locks can be picked, most people don't stop locking their doors. Reznor's experiment shows that the carrot approach can work well for artists, even with the stick.

Original here