More Evidence That If You Give People A Reason To Buy, They'll Spend More

from the no-more-analog-dollars-into-digital-dimes dept

Tue, Sep 20th 2011 3:07pm — Mike Masnick

For years, when we hear old media execs complain about new media, they talk about turning "analog dollars into digital dimes." But, of course, as we've seen, that ignores the reality, which is that the overall market continues to grow, not shrink. We saw this a few years ago when TopSpin -- a provider of a direct-to-consumer platform for content providers to market and sell -- provided some numbers on the artists they worked with and found that the average transaction price for people buying from musicians was much higher than the price of a CD. At the time, across all their musicians, the average transaction was $22 -- and some artists were seeing $50 or higher, with one having an average of over $100.

It appears that this is not limited solely to TopSpin, but other such platforms are seeing the same thing. Bandzoogle, a platform that provides a similar website/marketing platform for artists, has just announced that artists have made over $5 million via its platform, and noted that the average transaction price is $28.02:

The average sale amount by Bandzoogle members is $28.02. That's an impressive number, and means that usually folks will by more than one album, or a CD and a t-shirt, etc. Those who think they are now in the business of selling 99� downloads can revise their assumptions.

A bit less than half our members use our store features. Some don't have a store, or they integrate another store into their site, or outside of it. On average, Bandzoogle members that use the store feature make more revenue from it than they pay us in membership fees. This is wonderful.

Digital sales (albums or tracks) amount to about 17% of sales. This means that physical items (CDs or merch) still sell a lot more than digital downloads. At least from a band's website. Maybe iTunes and other digital stores are where fans buy more of the digital goodies.

There have been close to 200,000 transactions on Bandzoogle powered stores. Two hundred thousand times, fans have clicked on that "buy" button, and gone through the Paypal checkout. That's a nice number that proves that there are still fans out there that are willing to pay for good music and contribute to their favorite artists' careers.

It's not analog dollars into digital dimes if you do it right.

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Filed Under: business models, reason to buy
Companies: bandzoogle

34 Comments

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sehlat (profile), 20 Sep 2011 @ 3:22pm

The Key Word Is "if"
Every major media outfit, blinkered by "That's not the way we do it." has NOT done it right. The result for me is:

Movies: Netflix night once a week with my family. (My brother's got an account.)

Music: Independents pretty much 100%, except for the occasional "I'd kill to have that music"-level soundtrack.

Books: All ebooks, but I buy a helluva lot less since the Amazon-Publisher war.
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That Anonymous Coward (profile), 20 Sep 2011 @ 3:28pm

Maybe just maybe this will add some more weight to the fan side of the scales. Bands will see they really do not need the giant label to make it big. That this thing called The Internet isn't just a fad, and people use it to find what they like.

The Label will do everything they can to make it harder and harder for you to get exposure on the internet, except for tiny walled gardens where most real fans no longer look. If you dare to try and promote yourself on the internet The Label will take down your material and call you rogue.

It takes a little bit of work to connect with The Internet, and your dreams of being an overnight sensation will not happen. (The last overnight sensation - Rebecca Black... do you really want that?) But with some work and listening to the fans you can make a living. You might even manage to make it big... but never forget the fans... and if you treat them right, they will treat you right.
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blaktron (profile), 20 Sep 2011 @ 3:31pm

Even with the 'Analog dollars to digital dimes' prediction, it only takes 10 dimes to match the dollar, and anything more than that is gravy since theres NO backend cost for the extra dimes...

Ill take a free dime over working for a dollar any day, since I can still work, but free dimes don't come often...
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David Cortright (profile), 20 Sep 2011 @ 3:35pm

I just bought Jonathan Coulton's $100 premium package
And you know what? I had already downloaded the album from the InterWebs. And honestly, this isn't his strongest work. Even after multiple listenings, only a few of the new songs are really strong. The rest are mediocre.

So why did I do it? Well, part of the the appeal was the exclusiveness. Part of it was me wanting to support him because I want him to continue to create music. I believe in him. But also, the package offers his full back catalog with exclusive tracks. And for the super fan like me, that's what did it. The T-shirts and physical CD and all that jazz, that doesn't really motivate me. I'm in it for the music, and I can't get enough.
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blaktron (profile), 20 Sep 2011 @ 3:36pm

Re: I just bought Jonathan Coulton's $100 premium package
You freetard!!
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Chosen Reject (profile), 20 Sep 2011 @ 3:46pm

Whatever
Yeah, but this only works for artists that set up TopSpin or Bandzoogle accounts.
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rubberpants, 20 Sep 2011 @ 3:51pm

Who's looking our for the little guy?
And by "little" I mean the bloated distributers and rent-seekers. How will this help them avoid renegotiating their draconian licensing schemes and distributing monopolies? How are they supposed to grow fat and ripe by reselling a looted back-catalog until the sun burns out? That's what I thought.

/s
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Bengie, 20 Sep 2011 @ 4:29pm

Re:
It's probably more like one analog dollar with 80% overhead, so $0.20 net. Compared to 5 Digital dimes at 10% overhead, so $0.45 net.

But they don't say it that way because they want us to feel sorry for them.

Who is going to pay the horse trainers once cars take over?
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out_of_the_blue, 20 Sep 2011 @ 5:39pm

Before you go wild with glee, /think/ about this:
"On average, Bandzoogle members that use the store feature make more revenue from it than they pay us in membership fees."

"On average", eh? At the least that means MANY are paying Bandzoogle for services which don't return a profit. No wonder Bandzoogle thinks it's great: they benefit from those wanting to get rich. -- One of the most reliable paths to /actually/ getting rich is to flatter and fleece those with that desire.

Similarly, "on average", a Ponzi scheme pays out well -- up to a point.

The variable here is that early adopters get benefit of novelty, and relative rarity to be noticed. That'll necessarily change as time goes on, esp with spread of freetard habits of just taking without paying.
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out_of_the_blue, 20 Sep 2011 @ 6:00pm

Bandzoogle site: a lie, deception, and inflated number.
"This means that Bandzoogle members are 5 million dollars richer than they were before we launched our store feature."

NO, that's a LIE, it's at best LESS some unstated fees.

"Contrary to most online store providers, we have a policy to not take any commission (%) of our members' sales."

Now that right there is a masterpiece of deception. -- YEAH, your "policy" is to take money UP FRONT for your guaranteed profit, it's members who put money at risk. And says nothing about per-transaction fees.-- I'm not against it as a business practice, but the phrasing is simply sleazy.

And, 5,000,000/28.02 = 178,444, more than 10% off...
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Anonymous Coward, 20 Sep 2011 @ 6:43pm

Let's look at the numbers, and see what is really in there.

What are they selling, exactly?

If they are selling merchandise, the 5 million number is gross, and the net number is likely 10% of that, if even (as most bands aren't going to over price the stuff). So the average $28.00 sale nets the band a couple of bucks - excluding the cost of their time and efforts to actually get the merch setup and such. Time, ahh, the thing nobody counts.

So Mike, how about a break down so we can actually see if the model works, or if it is just another way for a middleman to make a bunch of money?
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Anonymous Coward, 20 Sep 2011 @ 6:47pm

why?
Why bother buying anything, when you can steal it for free? It's mikey's way.
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Brendan (profile), 20 Sep 2011 @ 6:55pm

Re: Bandzoogle site: a lie, deception, and inflated number.
It says over $5M. Also, you're missing the point.
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Ed C., 20 Sep 2011 @ 8:12pm

Re: why?
Because, unlike freetards like you, most people try to support the artist they like.
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kyle clements (profile), 20 Sep 2011 @ 8:32pm

Re:
Bands are already rejecting labels .

I personally know several musicians who have been offered contracts and refused to sign, because they were smart enough to read the fine print, do the math, and realize how much better they have it doing it on their own.

If labels want to survive, they need to adapt and become publicity agents and filters. There is far more music out there than I could ever listen to in 10 life-times. How do I find the good stuff? Solve that, and you've got the future of music.
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Anonymous Coward, 20 Sep 2011 @ 9:15pm

Re: Re:
"There is far more music out there than I could ever listen to in 10 life-times. How do I find the good stuff?"

tags
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Josh in CharlotteNC (profile), 20 Sep 2011 @ 10:24pm

Re: Before you go wild with glee, /think/ about this:
"On average", eh? At the least that means MANY are paying Bandzoogle for services which don't return a profit.

And how many bands who are signed with labels ever get "recouped" and start showing a profit based on fucked up accounting?

Right. Almost none.
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Ian, 21 Sep 2011 @ 12:57am

Yeah, and no, but....
I agree with the findings of both Bandzoogle and Topspin - and from experience using Topspin I can say that the average sale for my clients is well over $10.

But, there is a big caveat - it is only a small percentage of the list of fans that you build through freemium trades who will then buy anything at all from your 'direct to fan' store. I think 20% of a fan email list becoming buyers would be a great achievement.

And, it's definitely the case that lots of people just won't buy direct from yoyur own artists store - whether that's inertia, security or other concerns - who knows.

What you can't tell is whether a fan on your list (whom you acquired through an email for free music offer) who doesn't buy from you is buying digital downloads from Amazon or iTunes - or just isn't buying at all.

That doesn't mean that I think direct to fan isn't great. I do and I'd encourage very artist to have a site that offers tiered pricing and product bundles, but don't just assume that it is the single answer to every artist's revenue earning hopes.

It's a part of it and better than being signed to a label for all but the most commercially viable (or mainstream) artists.
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PaulT (profile), 21 Sep 2011 @ 1:43am

Re: Before you go wild with glee, /think/ about this:
Funnily enough, almost everything you said can be applied to the major labels as well.

"with spread of freetard habits of just taking without paying"

One of the things that make you idiots so laughable is that you cling to this assertion on virtually every story about people doing exactly the opposite.

Guess what? Most of the bands being talked about here will also be "pirated" to some degree. You don't have to force everybody who uses your music to pay you to be successful, you just need to give people a reason to pay that's good enough to do so. This is one of the points you always miss in between attacking people as "pirates" because they dare to suggest that piracy is not the biggest problem the industry faces.
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Lauriel (profile), 21 Sep 2011 @ 3:54am

Re: Yeah, and no, but....
I work with a Yoga school. I can assure you that our email list to purchase rate is somewhat similar to that - and we ONLY have one outlet, not multiple outlets.

I get the point of your post, and I honestly think that you make some good points. I also recognise that there are differences between industries, and also that sales on the internet are reaching a much broader audience, as they are not tied to a singular location. However, essential concepts are not that different. I would like to know why people involved in aspects of the entertainment industry seem to think that their industry is so different to that of others?

Does ANY business believe that they will have an email list that consists of 80-100% buyers? Are there ANY small businesses (and a band starting out is exactly that) that don't have to battle to have profits outweigh overheads?

Are there NO other industries (Yoga, remember?) that don't have huge amounts of free content on you-tube and other media that compete with their paid content? Don't businesses in these industries constantly have to search to find ways to promote their product, connect with customers (actually harder than fans, I think), and make their product worth paying for over the free content available?

I'm sorry if I'm overreacting to your mostly reasonable post, but really - a 20% uptake from an email list, while I'm sure there are many that have higher rates, is not abnormal, especially for a small business.

It seems to me, from the many posts I read from those involved in the entertainment industry, that there is a massively disproportional sense of what an achievement it is to be noticed, sell, gain followers, and be able to continue being in a business you love in such a saturated market. Have we really sunk so far that we ONLY consider a person successful or worthwhile if they have huge followings and are raking in millions?

Posts like this one make me think the biggest dilemma facing entertainment industries is that they've been hit with a large dose of reality.
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Anonymous Coward, 21 Sep 2011 @ 4:11am

Re: Re: Before you go wild with glee, /think/ about this:
Paul, he isn't wrong. The more than you teach people not to pay, the more likely that they won't pay even when the time comes.

Intentionally teaching people not to pay is one way ticket, one you have made the valuation of the product as zero, it is pretty much impossible to ever get it back.

It should also be pointed out that Mike is playing games here, because he is comparing apples and oranges. I would love to see what the merch numbers are for major touring acts, and what their net "per customer" transaction is overall. I am better that it is higher than $28!
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PaulT (profile), 21 Sep 2011 @ 5:31am

Re: Re: Re: Before you go wild with glee, /think/ about this:
"The more than you teach people not to pay, the more likely that they won't pay even when the time comes."

I suppose you have a citation for this bare assertion, right? It's not just your unsupported opinion like every other assertion you make and pretend it's some kind of truth?
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WysiWyg (profile), 21 Sep 2011 @ 6:44am

Re: Re: Re: Before you go wild with glee, /think/ about this:
"It should also be pointed out that Mike is playing games here, because he is comparing apples and oranges. I would love to see what the merch numbers are for major touring acts, and what their net "per customer" transaction is overall. I am better that it is higher than $28!"

But how many would have been able to get signed? And how many of them would have been able to turn any kind of profit?
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WysiWyg (profile), 21 Sep 2011 @ 6:47am

Re: Bandzoogle site: a lie, deception, and inflated number.
Your point would only stand if we assume that Bandzoogle try to hide their fees. I have a feeling that's not the case.

Please stop assuming that everyone is a moron, and let them take the chances they want to take. That's whats so great about this new age; everyone has option to take the chance.
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WysiWyg (profile), 21 Sep 2011 @ 6:53am

Less RtB, more OtB!
I don't need any more reasons to buy what I want, what I need is an Option to Buy, a way to buy what I want.

Originally I had highflung demands of High-Def content (I'm mostly interested in movies and tvshows) without DRM.

Now I'll settle for "able to play the content on my HTPC". It even runs Windows 7!

And yet I can't find a service that are willing to deliver. At least not here in Sweden. :-(
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Josef Anvil (profile), 21 Sep 2011 @ 7:12am

Do the math
There is nothing wrong with turning "analog dollars into digital dimes" when you look at the reality that you stand to pick up 1000x more of those dimes.

The problem is that the old guard wants their profits to multiply by 1000 and they can't get that to happen. Tech will eventually win this one and the old guard will morph into some other type of greedy beast.
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S, 21 Sep 2011 @ 7:24am

Re: The Key Word Is "if"
Just pirate the sound tracks; it's not like the artists are going to get compensated anyway.
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jupiterkansas (profile), 21 Sep 2011 @ 7:45am

The labels have to get out of the business of owning music and into the business of promoting music. The future belongs to whoever can best promote music and get people to listen to it. That's what bands want and need. Let the artists keep their copyright.
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Anonymous Coward, 21 Sep 2011 @ 9:17am

Re: Re: Re: Re: Before you go wild with glee, /think/ about this:
See "Pavlov's Dog" in Google.
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Paul, 21 Sep 2011 @ 5:20pm

Don't the major labels actually now own the notes all these other musicians are using in all their tracks?

Note infringing bastards shouldn't be allowed to use all those notes and sell their stuff straight to horrible consumers who aren't giving any money to major labels.
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David Dufresne (profile), 22 Sep 2011 @ 3:24pm

Re: Re: Bandzoogle site: a lie, deception, and inflated number.
"Your point would only stand if we assume that Bandzoogle try to hide their fees. I have a feeling that's not the case."

Hey, David, here, from Bandzoogle. We don't hide anything, our fees are here:
http://bandzoogle.com/pricing.cfm

And there is no other fee, no percentage of sales or anything else (except Paypal fees). In the post I explain why we decided to not take a cut on sales.

However it is true that outside the free trial and set-up, Bandzoogle is not "free" (vs. say, Bandcamp). We have real costs associated with providing the platform we provide; bandwidth, storage, domain names, development, marketing, maintenance, support, etc. and we are 100% independent (ie. not VC backed).

We only grow on profits we make (since 2003) and we prefer to grow slowly, but be able to support each one of our members.

Back to the post, if you do the math, the revenue per band or artist isn't spectacular, but that wasn't the point. Most of our members are "hobby" bands and have no pretention of makign a career out of it. But we also have a growing number of artists that are making decent dollars, and some successfully make a living from their music and craft, independently, by engaging their fans, creating multiple revenue streams (including online sales) and working hard.

They are part of a new and growing middle class of musicians and we're lucky to have front row seats to witness it.
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Suzanne Lainson (profile), 27 Sep 2011 @ 1:23pm

Entertainment spending
I've assumed for several years that entertainment would be one area where people would cut back to save money. These cutbacks will impact musicians.

Spending Less on Entertainment and Charity - NYTimes.com: Percentage-wise, the biggest spending decline was in entertainment, which fell 7 percent last year, to $2,504 a household.
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Suzanne Lainson (profile), 28 Sep 2011 @ 7:41pm

Re: Entertainment spending
Here's even more detailed info.

What People Actually Spend on Entertainment & Music... - Digital Music News
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Shine (profile), 3 Mar 2012 @ 12:15am

This is true. People are very willing to pay for products or services if they see the value of what they're getting.
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