Nettwerk, Topspin Show: Give People A Reason To Buy... And Many Of Them Come Through

from the some-data dept

Mon, Jun 22nd 2009 1:59pm — Mike Masnick

In the last post, I showed the video of my presentation at the NARM event full of music industry and music industry retailers. I recognize that not everyone wants to sit through a 30 minute presentation (even though I promise that it goes quickly!), so I did want to highlight two parts of it separately, here in text, that I think are worth calling out. Both show companies that seem to (implicitly or explicitly) recognize what we talk about in terms of enabling artists to better connect with their fans and give those fans a reason to buy -- Topspin and Nettwerk. We've certainly talked about both in various posts, but execs from both companies were kind enough to share some data on some of their experiments that have not been reported elsewhere, and which I thought was worth sharing.

Topspin, of course, has built up a platform to better enable artists to both connect with fans and to give them a reason to buy, and has been able to work with some fantastic artists, both big and small, including Eminem, Paul McCartney, the Beastie Boys, Metric, Beck, Van Hunt, David Byrne and a bunch of others as well. The exciting thing is the level of success Topspin has found with these artists:

The average transaction price across all Topspin artists has been $22. Compare that to the average price of a CD, which remains between $12 and $14. If you give people a reason to buy, they're willing to pay more. It's obviously not just about "getting stuff for free" as some contend.
Even better, two separate artists using TopSpin have found that their average transaction price is between $50 and $100.
Finally, one artist using Topspin has found (amazingly) that the average transaction price from what was being offered was greater than $100.
And, on top of that, on one recent project, they found that 84% of the orders were premium offers (meaning above the lowest tier).

The idea that people just want stuff for free? Debunked. Give people a reason to buy in the form of real value they can't get elsewhere, and they absolutely will. About an hour after my talk, Ian Rogers, CEO of Topspin did a keynote interview at the same event. You can watch it here:

Separately, we've definitely been quite impressed with what Terry McBride has done lately with some artists who work with Nettwerk, the indie label/artist management company. Terry's very much been a believer in the mantra of connecting with fans and giving them a reason to buy, and has even talked about how the whole concept of copyright has become outdated. His view isn't that this is necessarily a good or bad thing, but it's just the way it is, and in helping the artists he works with, they have to figure out ways to work with it. To date, that's included a lot of creative ideas for better connecting with fans and then giving them a reason to buy. One experiment he did was with the artist K-OS, who did a few different experiments, starting with allowing the fans to create their own "mix" of his latest album. Not a remix, but a mix. They released the stems of the songs before the album was released, let the fans create their own mixes, had them vote on the best, and then released two albums at the same time. One was the "pro" mix and the other was the "fan" mix. Then you could buy either one separately, or both together as a package.

The second experiment was the "pay on your way out" concert tour. Realistically speaking, this was a series of ten "free" shows. You could get in for free, but they asked you to pay what you felt was reasonable on the way out. Given the insistence by people that fans just want something for free, you would expect that very few would actually pay anything at all. Of course, that wasn't what happened.

Terry was kind enough to share with us some data from the experiment. Despite being free to come and go without paying anything, 63% of people attending ended up donating money on the way out. Now I'm sure some folks will mock this and say that he could have made more by charging everyone, but it seems quite likely that a lot more people came out to these free shows than if he had made people pay in advance. Almost two thirds of people ended up paying, totally voluntarily -- and their average donation was $6. Again, some will claim that this is low, but you have to look at the bigger overall picture. During this tour each of the two K-OS CDs were separately in the top 50 list of best sellers.

So, he gave a series of free shows that ended up bringing in tens of thousands of dollars combined (average attendance at each show was approximately 1,000 people) and it helped get a lot of people to buy both the CDs that were being offered in support of K-OS. Some people are going to nitpick the numbers, of course, but the evidence remains clear again: it's not that fans just want stuff for free. If you give them a reason to buy, an awful lot of them will absolutely buy.

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Filed Under: business models, economics, music, stories, success
Companies: nettwerk, topspin

21 Comments

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Anonymous Coward, 22 Jun 2009 @ 2:15pm

So then 10 free shows brought in roughly $40,000 not including any merchandise sold or the album sales. Doesn't sound like chump change to me. In fact, sounds like they did pretty well.
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Anonymous Coward, 22 Jun 2009 @ 2:35pm

Average transaction price = X
Average number of transations = y

Z = X * Y

Without Z, X is meaningless.
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- Anonymous Coward, 22 Jun 2009 @ 2:47pm
  
  Re:
  What is that supposed to mean?
  
  Are you suggesting that a promise to make Z was made by an artist and/or artist's manager, yet when X or Y differ, and affect Z, the RIAA comes in to recover ΔZ?
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  - Anonymous Coward, 22 Jun 2009 @ 4:56pm
    
    Re: Re:
    No, it means that unless you know what Z is, the actual X is nothing.
    
    If I can get one sucker to pay 1 million for a hotdog, I could say that the "unit price" for hotdogs is 1 million. It's true, but it is also a lie. Without the total at the bottom, there is no way to know the number of transactions.
    
    Further, in this world of giving away "stuff" to get other "stuff", what was the total cost of the stuff? If a CD is worth, I dunno, $10, and a t shirt is worth, I dunno, $15, and together you sold them for $20, well, that ain't very good business, is it?
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    - Anonymous Coward, 22 Jun 2009 @ 6:29pm
      
      Re: Re: Re:
      From the article:
      a lot more people came out to these free shows ... average attendance at each show was approximately 1,000 people
      
      We do not know how many more 'a lot more' is, lets say its 200 more (about 25%). So thats 800 folks at a paid show and 1000 folks at a free show. Lets assume that 100% of all attendees buys the CD and the t-shirt:
      
      800 transactions * $25 CD+t-shirt = $20000
      1000 transactions * $20 CD+t-shirt = $20000
      
      How is that bad business? Are you saying that a larger percentage of attendees at the paid show also buy the CD and t-shirt than attendees at the free show?
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    - Anonymous Coward, 22 Jun 2009 @ 8:56pm
      
      Re: Re: Re:
      So, um, what's wrong with letting X = market value?
      
      If the market can only bear an average $6.00 additional value on a $0.00 price, do you see anything wrong with your pricing valuation?
      
      Remember, it *was* a "Free Concert" akin to "Free Beer".
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- Anonymous Coward, 22 Jun 2009 @ 5:47pm
  
  Re:
  You suck at algebra.
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BullJustin (profile), 22 Jun 2009 @ 2:57pm

money money money
10 free shows * 1000 attendees * 63% donating * 6$ avg donation = $37,800

Next questions:
What does it cost to stage a 1000 person show?
What does it cost to run a 10 stop tour?
How much was made on merchandise per show?
What was the average net take per person?
How big would be the expected crowd with a traditional buy-tickets-in-advance model?
How would be the expected income (tickets + merchandise) compare to the actual take from the free-show model?
And the biggest question - how many more people are now fans than would have been with the traditional model?
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- Suzanne Lainson (profile), 23 Jun 2009 @ 7:00am
  
  Re: money money money
  Nettwerk didn't really need to sweat the money coming in for these shows because they were sponsored. I'm all in favor of corporate sponsorship, so having free shows (or nearly free) is fine with me.
  
  One thing you have to consider, though, is that if an artist is giving away music (or doing pay-what-you-want) and is giving away concert tickets (or doing pay-what-you-want), the income both cases may not be enough to pay the bills.
  
  Many artists give away recorded music to get people to shows, where hopefully they will pay more.
  
  If you eliminate income from both shows and recorded music, then you are left with merchandise and/or special services like having lunch with the artist.
  
  I'm not arguing with the concept of free. And some artists don't need to make a living from music, and others can survive on the tip system. But it is hard to make a living at music and chances are most artists are not going to bring in enough to pay their bills. I think all the emphasis on free and new music business models downplays that too much.
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  - Anonymous Coward, 23 Jun 2009 @ 4:27pm
    
    Re: Re: money money money
    Oh god, Mike is going to flip. One of my predictions came completely true, which makes me as much of a guru as Mike.
    
    Someone gave the music away for free, in order to sell concert tickets.
    
    Now someone is giving away concerts to try to sell t-shirts.
    
    When will someone give away the t-shirts to sell a CD? Oh, wait, Mos Def is just about to do that.
    
    Bravo Mike - the infinitely free music industry is here.
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Anonymous Coward, 22 Jun 2009 @ 4:15pm

When you say Eminem in the same sentence with fantastic and artist, you loose all credibility.
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- Mike Masnick (profile), 22 Jun 2009 @ 4:24pm
  
  Re:
  When you say Eminem in the same sentence with fantastic and artist, you loose all credibility.
  
  Actually, when you brush off successful business models because you personally don't like one artist YOU lose all credibility.
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Anonymous Coward, 22 Jun 2009 @ 5:22pm

Here is another question: If the stuff was offered before, were people buying it? Is it a total requirement to give away music just to sell merch these days?

When did music so lose it's value that we are forced to tie pork chops around the songs to get a dog to play with them?

What's the deal?
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- nasch (profile), 23 Jun 2009 @ 10:37am
  
  Re:
  The deal is you're confusing value and price. Many people do this. If fans didn't value the music, they wouldn't be fans. They wouldn't even listen to the music. Clearly they do value the music, however this does not necessarily mean the music will trade at a high price.
  
  On the other hand, if a band is having a hard time getting anyone to listen to their music, that may be a sign their music has little value (ie isn't very good).
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Farrell McGovern (profile), 22 Jun 2009 @ 6:54pm

Cart before the horse?
Most artists do not do music to make money. They do it because they like to play music.

This is an important thing to remember, because of most of them could have a reasonable income, say equiv to $30,000 a year, most would be ecstatic to get that and be able to play music full time. They don't need millions dollars, they just want a living wage which will enable them to do what most people want to do...hang out with friends, get married, have kids, etc. Most musicians are just everyday people.

So rather than rig the system so that it only works when the artist is selling in the millions of dollars, we need to re-jig it so that artists make a living wage. That some will do better is a given...I maintain that given a model like this we would have more good music, less filler, and more people would hear good music. Music is part of life, even if you are not a musician.

Of course, if we set it up so that the musicians get paid a living wage, so, too will people within the record companies. We don't need CEOs who get a million dollar bonus every time they blow their nose! And I ask you, do you really think that anyone can really be worth HALF A BILLION DOLLARS as the CEO of a company? Over a lifetime, never mind as a yearly wage? I don't either. But this is a different conversation...

ttyl
Farrell
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ranon, 23 Jun 2009 @ 3:52am

Pay on your way out is a very old business model. The church has used it to great success.
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Killer_Tofu (profile), 23 Jun 2009 @ 6:03am

Another Reason Why
Another reason I love these models is that when I pay for these, I KNOW that the artist is getting the money.
Not some fat cat executive middle man making millions for screwing them over.
Knowing that the artist will get most to all of the money is a huge deciding factor in how much I pay or am willing to pay.
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SunKing, 23 Jun 2009 @ 6:56am

@AC:
"Is it a total requirement to give away music just to sell merch these days?"

Massive disconnect right here. You ARE an analogue man in a digital age.
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Eric, 23 Jun 2009 @ 9:54am

No Ticketmaster = )
I think the greatest thing about this is the lack of those unbelievably high ticket fees ticketmaster charges. Would love to take them out of the loop!
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kevin (profile), 8 Apr 2011 @ 12:10am

I tried to the fix the code for NDoc as above and enter the dll I need to document. The process seems to be running quite fast at the start but then it hangs up Pellet Mill
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