Tattertech Blog

As of 1/2/08,
154,449 people chose to download Saul’s new record.
28,322 of those people chose to pay $5 for it, meaning:
18.3% chose to pay.

Above are the stats Trent Reznor released on his experimentation with a new distribution model outside of the record label. Chris Anderson of Long Tail fame, points out that this actually results in a $141,610 without a record labels interference. Reznor previously stated that on Saul’s prior album (released through the studio) for a $16 CD, he would get $1.60. Using Reznor’s data, Anderson says Saul would have made $54,235 on it. Anderson argues that Reznor/Saul worked out better this way most likely.

The problem is we’re missing some of the data. Trent only says that the studio costs to produce the album were extremely expensive along with setting up the distribution system (server/bandwidth/etc). It is possible that these are high enough to make this a net loss comparison for Reznor. But Anderson isn’t the only one missing part of the picture. Although he may have released adjusted numbers, there’s a chance the conversion rate Trent released is actually deflated. Many people may have downloaded the free version, listened to it, and if they liked it returned to purchase a higher quality version. These people should be removed from the free download statistics and placed in the paying column (not just place in both). This would create a rate of 22.5%, still not as spectacular as Trent/Saul likely hoped but not bad for a niche artist.

The numbers might not be done yet though. Keep in mind, they didn’t spend any time on traditional marketing, instead focusing on word of mouth in their respective fan bases. However, the experiment did get exposure outside of those channels simply by being a new experiment in music distribution. As a result, some of the free downloads (and ideally for them some of the conversions too) were people that would have had no interest in the album previously but checked it out just because it was being offered free from the artist. If a larger number of artists released this way, the number of free downloads might have been significantly lower (and the conversion rate presumably higher if we can assume fans are more likely to be loyal to users). I think that’s a big take away compared to what Trent says who seems down on fans not purchasing at a higher rate - a significant percentage of these might not be fans (especially considering Saul’s previous album sold so few copies). To some extent Trent does recognize this when he says, “Saul’s music is in more peoples’ iPods than ever before and people are interested in him. He’ll be touring throughout the year and we will continue to get the word out however we can.”

Maybe that’s the biggest lesson here. Take advantage of an exciting distribution system while it’s still exciting and you can get increased exposure. Sure, you won’t win everyone over, but you might grab people who normally wouldn’t have ever heard of or been interested in your work.

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Nothing particularly amazing here, but it is more validation to my thoughts that you’ll see social networks appearing related to particular interests. Finding networks with niches you’re interested in is simply a means to filter out the noise. We’ve seen the trend with major portals, and it’s no surprise that the trend would occur to some extent with Social Networks.

Now a network that can properly guide people along the “long tail” (or for that matter, a major portal) may be able to fight off some of the fracturing pull. As they are, I don’t know that any of the major social networks are in set up to truly guide their users into their niches. The next big move will be who can make it easy to flow between niche network to niche network (OpenID perhaps?) - and how they manage to monetize against it. It will also be interesting to see just how much room there are for different smaller networks (and how much money each can earn).