Rocking the Jolly Roger

Oh, whatever will the music business do for pirates now that it has enticed Sean Fanning to walk its plank? Maybe it will come to understand piracy as a driver of sales and marketing strategy, instead of as a reason to hire lawyers and throw away the key. Perhaps, at long last, it will recognize that there's a little bit of Napster in all of us.

Piracy has indeed been a force for innovation in distribution, sales, and marketing. Product development. too — just look at the iPod. It's true: For any brand-builder interested in marketing and selling more stuff through keener understanding of consumer behavior, the piracy thing is about as juicy as it gets.

But sales and marketing people have, for the most part, ignored piracy's flipside potential. It's mostly been the creative types in the equation — the artists who are, in effect, the brands — who are looking through the other end of the spyglass.

Let's start with Prince Rogers Nelson. You know, Prince. Last summer, Prince played the piracy card by giving away a copy of his latest CD, Musicology, with every ticket sold to one of his concerts. The kicker was, he convinced SoundScan, which tracks record sales, to count the giveaways as "sold" CDs.

That sent Musicology charging up the charts, which gave Prince more radio airplay, more publicity, and more displays at retail. The result, of course, was more sales. Well, that was just a little too much success for SoundScan, which quickly announced it would not allow anybody else to do what Prince had done. Sadly, this seems to be a pattern in the music industry: If it outwits the rules, outlaw it.

What Prince did was possible because of a highly innovative record deal, under which he was paid no advance, but retained artistic control as well as ownership of his master recordings. The deal not only gave Prince the freedom to record whatever the heck he wanted and give away CDs, but also to distribute his work via his Web site, where fans could download Musicology for a low-cost, one-time fee.

"I don't really take a stance on piracy," Prince told USA Today. "If I was only getting a few pennies off every album, I'd be worried. But I get $7 a pop for every album that sells for $10. That's enough."

That would be more than enough for Wilco, the pop combo, which, incredibly, chose to pirate its own work. Having been fired by its record label over artistic differences (yet another pattern here), the band streamed its 2001 collection, Yankee Hotel Foxtrot, online, for free. By the time the record was released for sale by Wilco's new label, Nonesuch Records, it was so well known and loved that it promptly hit No. 8 on the Billboard charts, which was better than any of the group's previous records had done.

"Treating your audience like thieves is absurd," Wilco's Jeff Tweedy told Wired magazine. In fact, in a remarkable display of the true colors of truly loyal consumers, some of Wilco's fans were so grateful for the free tunes that they actually asked to send some money for it — which the band accepted and forwarded (a total of about $15K) to Doctors Without Borders, a charity.

In the same interview, Tweedy made the key point that the resolution of online music is not as high quality as the offline kind. It's a point that ex-Byrd Roger McGuinn made about four years ago, in testimony before the U.S. Senate, at the height of the Napster controversy. Hailing the Internet as "the radio of the 21st century," McGuinn implied that those who saw piracy as a threat simply hadn't considered its promotional possibilities.

He later expounded on that thought in an interview with Reveries, commenting: "I don't think they get it. You know, when you get your songs played on the radio, people can tape that and the quality is just about good as an MP3... I've only gained exposure through the Internet, as opposed to losing record sales."

That exposure has mostly been of McGuinn's own making. Way back in 1995 he launched FolkDen.com, where each and every month since he has posted a song that his fans can download — for free. Earlier this year, he capitalized on his hard-earned online presence by forming his own record label, April First Productions, and releasing a new rock album, Limited Edition — so named because it is available for sale online only — the CD via Amazon.com and McGuinn.com, and on iTunes and eMusic as downloads.

In a few short months, Limited Edition, via limited online distribution, has made more money than McGuinn's previous major-label hit record, Back from Rio, which despite having sold more than 500,000 copies, never turned a dime — at least for McGuinn.

"Downloading on the Internet is good for the artists, though not necessarily the record companies," McGuinn said in a recent telephone interview. "But record companies aren't always good for artists, either. The record companies say, well, we'll lend you some money to make a record, but we get to keep all the profit. It's like Tom Petty's song, "The Last DJ": "You get to be famous, and I get to be rich."

Although McGuinn says he doesn't have the data to determine a direct correlation between FolkDen.com downloads and Limited Edition sales, he says he picked some of the songs for the record based on their popularity as downloads. Encouraged by robust sales as well as glowing reviews, McGuinn, who recorded most of Limited Edition using a Dell laptop in his own home studio, is now planning to market a CD-quality boxed set of the more than 100 songs otherwise available for free on FolkDen.com.

McGuinn says his only surprise has been how easy it is to be his own record company, commenting: "You record, mix and master it, send it off to the pressing plant, and it comes back with a real bar code on the package. It gets reviewed in Rolling Stone magazine and sells on Amazon.com. I mean, you're in business, and it makes it feel like, wow, why did I do it any other way?"

Sales and marketing innovation based on an enlightened view of piracy is not the exclusive domain of the artists, of course. Wilco's financial success was based on a subsequent record deal with Nonesuch, and Prince's strategic subversion was premised on distribution via Columbia Records. A new record label called Team Love, meanwhile, gives its customers a chance to download — for free — every track it sells on CD. Explains Nate Krenkel, Team Love's founder, in BusinessWeek: "There's something exponential going on. The more music that's downloaded, the more it sells."

A record label called ArtistShare takes the concept of downloading a step further by offering its customers access to accoutrements of the creative process itself — including rehearsal sessions, musical scores, and artist interviews. In some cases, customers are spending three times the cost of a CD alone on such extras. The approach has attracted artists such as jazz great Jim Hall and Trey Anastasio of Phish fame.

Yet another new label, called Magnatune, is connecting the dots between eBay and the record business with a model in which it's up to the consumer to decide whether to listen to a record without downloading it or buying it (kind of like radio). If the consumer decides to buy, the suggested price per album is $8, but consumers can pay less (but no less than $5) — or more — if they want. Incredibly, consumers, on average, pay more than the suggested price.

Why? "Consumers want to support the artists," John Buckman, Magnatune's ceo explained to Kevin Maney in USA Today. For some strange reason, it does seem that consumers don't necessarily feel the same love for the record companies that would just as soon have them arrested.

Remember what David Ogilvy said? He said a lot of very smart things, but this is one of my favorites: "The consumer is not an idiot. She is your wife." Were David Ogilvy alive to witness the present-day collision of piracy and consumerism, he might have added: "The consumer is not a criminal, he is your consumer."

Aye, we are all napsters now.


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