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Long Tails and Nine Inch Nails

Originally published on March 11th, 2008. 

Originally published on March 11th, 2008. 

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The music industry has been bleeding out for nearly a decade now, and last week Trent Reznor drove yet another nail into its coffin.

The frontman for Nine Inch Nails, Reznor cut his teeth forging goth-metal and industrial techno over twenty years, selling tens of millions of records to angsty teens bored with grunge. Now, at age 42, Reznor is joining the ranks of artists moving away from the major labels and helping to rewire the music industry for the digital age; and unlike armchair industry critics, he’s experimenting in real time, with very real models.

On March 2, Nine Inch Nails released “Ghosts I-IV,” a 36-track instrumental collection available directly from the band’s Web site. The complete album can be downloaded for as little as $5, and every bit of that revenue belongs to the band. Oh, and there is revenue: at least three quarters of a million dollars in the first two days, and that’s not even counting the $5 downloads. Reznor has engineered an alternative way to give fans what they want. In return, they are paying for it. Music execs, take notice.

Reznor’s pricing structure offers fans choice, maximizing potential revenue across the varying strata of fandom. It’s also inclusive, providing offerings for the die-hard groupie down to the experimental listener not yet ready to shell out hard cash. Nine tracks are available via download free of charge, and the complete 36-track album, including a bevy of digital perks like wallpapers and cover art, costs only $5. Ten dollars gets fans a download as well as a physical copy of the two-CD set. For $75, additional DVD and Blu-ray discs with multi-track and high definition stereo are included. But the instant success was a limited edition package, including vinyl records, Reznor’s autograph and other paraphernalia, for $300. The 2,500 copies quickly sold out.

The hard download numbers behind the release are not yet available, but the impact is already apparent. It doesn’t take a record company executive to figure out that $300 multiplied 2,500 times grossed the band $750,000 in two days. Even if the band spent, say, $35 per package in manufacturing costs, Reznor and company walked away with well more than a half-million dollars. Moreover, the band makes more money selling fewer albums than in the traditional model. Artists’ royalties through a major label generally add up to ten percent of the sale of a $15.99 CD. At $1.60 per album in royalties, NIN would have to sell over 3 times as many albums to make the same bank.

Releasing an album directly to fans is neither new nor groundbreaking. Small-time acts have been producing their own records for years, and last year British alt-rock staple Radiohead released its “In Rainbows” album directly to the public via the Web, asking fans to pay whatever they wished. Frontman Thom Yorke said this model netted the band more digital revenue than all their previous releases combined, though the band has refused to release the numbers behind this experiment.

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But Reznor does want to talk numbers. Once an outspoken critic of illegal file sharing, he had an epiphany a few years back. In a YouTube clip in which he urges fans at a concert to “steal and steal and steal some more,” Reznor made clear his anti-label sentiments. Since then, he has been conjuring new ways for musicians to turn a profit in the wake of illegal file sharing. While record company execs carefully guard what’s left of their bottom lines, Reznor has been experimenting, and at times bleeding a good deal of time and money in what appeared to be a realization of the nihilistic themes in his music.

Reznor’s new model is more or less the culmination of simple trial and error. Last November, Reznor produced NIN tour alum Saul Williams’ “The Inevitable Rise and Liberation of Niggy Tardust.” Building on Radiohead’s archetype, the artist allowed fans to download a free, low quality version of the album, or they could pay $5 for a high quality format, a price Williams and Reznor reasoned was equal to that of a good latte.

The results, in Reznor’s own words, were “disheartening.” At year’s end, only 18 percent of those who downloaded the album had paid the $5. But perhaps more importantly, 154,000 people took the free download, far exceeding the reach of Williams’ previous effort, which sold around 34,000 copies. While Williams waits to see if his current tour revenues spike on the wave of new exposure, Reznor is already testing his metal on his multi-tiered pricing model, mixing free content, plenty of non-music extras and the instant gratification the post-Napster era requires.

When the final numbers are released–and Reznor has indicated they will be–everyone in the record business will be paying attention. And while Reznor has not produced a silver bullet–after all, smaller, lesser-known acts cannot be expected to fetch $300 a pop for limited edition packages–he has made it clear that in the digital age, the old way of selling albums is trapped in a downward spiral.

For the record industry as we know it, 2008 really could be the beginning of the end. For musicians embracing the new individualism of Web 2.0, this may indeed be year zero.

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