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Music Valuation 101: NIN creates users out of fans

When Trent Reznor became a free agent, breaking free from his multi-album deal with Interscope, many in the industry waited breathlessly for him to make his next move.  After his experiment with Saul Williams yielded mixed results, his project, Ghosts I-IV landed.  

The project marks a departure from Reznor’s more poppy past, as this “album” is purely instrumental.   

The latest project has been a success by several measures:

1. Tiered offering by market segment. With fewer splits of the revenue Reznor has made his project successful by pricing it realistically for the market. 

• New fans and casual listeners: Get tracks 1-9 or “Ghosts I” for free.
• Older fans and converts: $5 for 320kbps high quality download.
• Old school fans with no money: $10 full CD set
• Collectors and hardcore fans: $75 box set in fabric slipcover
• Hardcore collectors: $300 ultra-deluxe limited edition

2. Creative commons license: Reznor emblazoned his IP with a Creative Commons license. His reasoning?  What’s the value of music? Nada.  Can you CREATE value by giving your users something valuable? Yes.

3. Reznor has made fans into users. This is not the first time he’s done this.  He came out with a remix project even when he was with Interscope.  As I’ve argued before the value of music is now ZERO, zip.  Supply is nearly unlimited while demand remains constant.  Anyone who’s ever taken an econ class will recognize that that means that value of music is approaching zero.  So how do you monetize?  The combination of 1 and 2 above means you’re hitting the consumer AND the prosumer.  The consumer is interested in individuality and self expression for his own personal ego.  The prosumer is interested for professional gain, even if the CC license does not allow him or her to profit directly off a commercial release.  They’re going to blog their remixes, send to friends and other bloggers, and flood the market with free music that is an expression of their own artistry.  Much like a website, NIN fans are now users. UPDATE: NIN has sold out of the $300 limited edition package in only 3 days.  

Hahaha this made me laugh.

Someone needs to tell this to my Grandma… 

“Atlantic City is one of the most disgusting places in the world,” said Sean Kalish, a 26-year-old lawyer who visits the casinos to play poker. He was standing in a slender peacoat waiting for the Atlantic City bus at the Port Authority Bus Terminal on Wednesday. “It’s like Las Vegas got drunk and slept with South Jersey and this is their bastard child.”

read more from the NY Times 

What Stanford Learned Building Facebook Apps

Dr. BJ Fogg and Dave McClure taught a class last semester at Stanford on Building Facebook Applications. In 10 weeks, the 80 students had created 50+ applications and in total had over 20 Million installs - with 5 having more than 1 million users. At today’s Graphing Social Patterns conference, BJ and his two teacher assistants shared 10 tips they learned from the experience. Here they are:

1. It’s never too late to create a winning app
2. Simplicity & clarity are key to app success
3. Aim for speed & flexibility in launch and iterations
4. Community cooperation leads to success (in other words, the most successful students shared the most)
5. Individual opinion about apps are worthless, you need to get out there and see what happens
6. Copying success is a cheap / fast way to succeed
7. Metrics do matter, but today’s tools are too weak
8. You CAN learn to create a winning app
9. Success comes from the CHAOS / CONTROL Cycle
10. Mass Interpersonal Persuasion is finally here

Interview with myself and Abby over at Darrenherman.com

Abby and I were interviewed for the first in a 12 part interview series for Darren Herman’s “CEO and Founders Series”, a special collective leading up to the release of Darren’s new book Coloring Outside the Lines to be released on March 12th. 

For those of you who don’t know Darren, he’s an entrepreneur himself and the founder of the in-game advertising firm IGA Worldwide. He’s currently at Media Kitchen, heading up their digital strategy.  

I’ve posted an excerpt of the interview here, for the full text check it out on Darren’s blog:

“2. What are you currently up to? If entrepreunering (my word), tell me about your startup.

Well, where Haystack is now and where we started are two different animals. 2 years ago we launched a music social networking site all about connecting passionate music fans to new music, through trusted sources. We called them Tastemakers. We wanted to bring the John Cusack character from High Fidelity, the guy behind the record store counter, to the web. The idea was that if people thought that a guy like Darren Herman (yikes!) had great taste in music, they could go to your profile on Haystack, see what you had in your playlist, and listen to it right there.

As we continued to grow Haystack, we realized that no one destination was going to be able to able to reach the dominance of sites like Myspace. We asked ourselves how we could future proof destination-based music marketing and still allow an artist to reach the targeted masses that so desperately were seeking their music. In our view, the ad supported music model of the future was one that would an enable an artist, brand or label to float with the user. In mid 2007, we created The Haystack Network, which is now our primary product to address that need. To date, we’ve aggregated publishers representing over 42MM monthly unique visitors that provide ad space on their website to serve viral widgets containing music sponsored by advertising. The widgets themselves can be spread to individual users’ Myspace, Facebook and social networking pages and we can centrally control the release of both music and ad campaigns on an asset ID level.

Advertisers love it, because they can reach users in a real way, paired with the music they’re already looking for. Artists are happy because those advertisers sponsor the distribution of their music to sites they would never be found on otherwise. And, the publishers love it because they’re getting paid premium CPMs for the placements.

3. Why are you doing this? You could be doing so many other things in the world, what about this particular idea strikes you?

We’re doing this first and foremost because we love music, love helping others find music, and love the excitement of being young entrepreneurs growing a business. Every single person on the Haystack team has some background in music (both on the business and performance side). Whether or not it’s through the destination or through Haystack’s distributed widget platform, ultimately what we’re doing is helping to bridge the gap between artist and fan, and enabling advertisers to reach users in a targeted way. We believe that distributed models are the future of the web and we’re excited about advances that will bring further portability to the content we’re distributing in the future. That just means we’ll have even more ways of helping people find music in the places that they already exist, on and offline.

4. All startups should be addressing a problem in the market. What is that exact problem and how are you solving it?

Artists spend a lot of time building destinations. Whether thats on Myspace, iMeem, iLike, Last.fm, or even Haystack, they make a very large investment on building out a central home for their fans to find their music and listen to it. But the fans themselves are fickle. Recent news suggests traffic on sites like Myspace and Facebook are declining as users shift from new hot website to new hot website. We want to enable an artist with the means to future proof against that and build portable applications that can live anywhere. That way, when their fans move off of a destination they can take that music and promote it wherever or however they please. And ditto for the advertiser that’s getting the benefit of riding along with an artist.”

Read more here

Deal Journal: Sprint Nextel: Officially a 'Deal From Hell'

Oh that hurts, Sprint.  Despite aggressive pricing cuts yesterday that now place them as the lowest priced carrier - undercutting even T-Mobile, the WSJ has a new story up today detailing something we armchair economists already knew: the Sprint-Nextel merger is a failure.  

 The company yesterday reported a net loss of $29.45 billion, thats more than the company is worth, they have a market cap of $25 billion.  And yes, most of it is due to an additional writedown of $29.7 billion.  And I thought I had it bad with LVLT.  

Run for the top of the hill Sprint longs, after they have to dismantle all of their cell towers and sell them at auction to Verizon, it’ll be the only place you’ll get service! Deal Journal - WSJ.com  : Sprint Nextel: Officially a ‘Deal From Hell’

Study Sees Digital Music Shakeout

“London-based research firm Point Topic said that, in a global sector that has more than 498 digital-download services operating in more than 40 markets, digital music services with robust business models are expected to survive by being acquired by the major digital music players while the weak ones collapse.

Among the major digital music companies Point Topic said are expected to embark on an acquisition spree are Nokia, Microsoft and RealNetworks, operator of U.S.-based subscription-funded service Rhapsody.” 

Study sees digital music shakeout