Three Free Lunches To Go, Please And Thank You

Aside from being high-profile musicians, what do Madonna, Prince and Radiohead have in common? (No, this isn’t a bad joke.)

The music industry has undergone significant shifts in recent times, brought on by the birth and widespread use of the Internet and the dawning of the digital revolution, giving rise to technological torrents and the transformation of distribution models. These shifts (think on the scale of tectonic plates) are affecting various industries, the music industry being the most obviously hurt, or at least its demise being the most widely and heavily publicized. And looking at this model gives some insight into where book, er content, publishers should cast their eye.

Madonna sacked Warner Music Group (WMG), her record label of 24 years; Radiohead self-recorded, self-promoted and self-sold its optional-fee latest album digitally; and Prince gave away nearly three million free copies of his latest album with London’s tabloid paper, Mail on Sunday.

The common thread you ask? These artists are hungry for new ways to get their music out and are leading the pack in finding alternative distribution and retailing avenues. In the words of Bob Dylan, Times they are a-changin, and these artists are on it.

Like many artists with entrepreneurial integrity (be they authors, musicians, film directors), they are trying to open up distribution channels and access larger audiences with whom to share their proprietary content. Be they buyers or free-downloaders, the more ears that are tuned in, the more concert tickets and merchandise sold. Not only are they looking to new distribution models but they are also the first to breakaway from industry norms in the quest for enterprising ventures outside of the conventional box.

That said, insight can be gained by looking to the current shaky ground state of the music industry and emerging trends in alternative distribution and retailing, which are paving the road ahead, or at least dropping bread crumbs along the trail, and offering direction as to where the book industry just might be headed.

The music and film industries were the first to be caught in the winds of digital change, starting with Napster, KaZaA? and the other such peer-to-peer (P2P) web applications that kept popping up, and continue to, with the turn of the century. Now, with the steady rise of the e-book (wholesale revenues have quadrupled in the past five years according to the International Digital Publishing Forum), free internet downloading of digital copies brought to you by Google Books or promoted by Oprah and products like the Kindle and other pragmatic e-readers, the digital format and its various distribution models will only continue to grow and diverge from here on in.

Madonna, arguably one of the most prominent pop culture icons and trend-setters of the last three decades, continues to trend make, not just in her music but, too, in her music distribution and retailing ways. She recently ditched her 24-year record label, Warner (which she had been with her entire career), to run with event promotions company Live Nation. They will manage all of her rights, including touring, recording and merchandising.

A senior music industry source tells the press: “This is a sign of the times. At this stage in her career Madonna realises she stands to make more money from touring - GBP130 million ($260 million) on her last tour - than releasing records. “So she wants to go with a company that can look after both rather than being tied to a record company.” (Madonna Live Nation; Madonna Leaving Warner Music)

This translates into the book publishing industry too. The potential threat of authors dropping their publishers is very much a reality. The publisher and/or agent has an evolving role that might include publishing a book but greater emphasis should be made on world-wide author tours and speaking engagements, selling books and other merchandise on-site but really reaping the finances from ticket sales and merchandising.

Perhaps onto this shift early in the game is Edmonton’s Greenwood’s Volume II bookstore, which recently shut its doors in order to launch a venture featuring live author events, readings and book launches instead of retail sales (Morash). There is definitely more of a margin to be gained with ticket sales when you can set your own prices instead of having them be dictated to you by book publishers.

But Madonna will continue, it is believed, to actually sell physical albums while some artists are seemingly giving away their music for free to the masses. they are creating a great marketing/PR hype wave around the album while the reliable/loyal fans are still keen to buy a product they can handle (and, in the case of Radiohead’s In Rainbows album, a small, though significant, portion of optional-fee based downloads were paid for the digital album, while still others pre-purchased the later to-be-released CD after already having downloaded for free, or for a fee, the digital album, which they considered merely as a preview). Grammy Award-winning Jamiroquai is also looking to this model, following Radiohead’s acclaimed successes.

Then there’s the case of Prince offering up his latest CD with the purchase of Mail on Sunday, a London Tabloid selling for a $3 cover price. Prince received a chunk of cash from the paper, meanwhile the paper printed an additional 600,000 copies of the daily. So, Prince made way with a million bucks from his UK audience without his album ever making way into a music retail store. (His previous album sold only 80,000 copies in the UK, of which he received 10% in royalties.) Speculators are saying that the deal may have earned him more than eight times as much (Farouky). Further, his album got into the hands of 2.9 million people (some of whom may have been spurred on by the free album and become fans), his 21 London shows are sold out and the paper gained an additional $1.8 million in daily revenue and a whole lot of publicity around the globe. A win-win scenario, indeed.

It’s the free lunch concept, as related by Chris Anderson in his, “Free! Why $0.00 Is the Future of Business,” article. San Francisco saloons of the 1800s offered free lunch under the pretence that the patron would purchase a beverage and it was (and still is) the beverage that had the highest margin. It’s a concept that leads into to the 3rd party dynamic in which the buyer receives something for seemingly free from the seller (or provider, as the case may be), meanwhile the seller/provider receives remuneration from a third party. This could be from advertisers or mailing list buyers who are hungry to get to the seller/provider’s audience.

In the case of both Radiohead and Prince’s successes, there’s already a case study in the book publishing sector that equates. It is the classic mainstream example of the Oprah-endorsed, Suze Orman-authored, 33-hour free downloading bonanza of Women and Money just last month. Though the title had been out a year already and widely downloaded for free, the book still sold unabashedly, landing the book at number six on Amazon.com (Oprah plug makes business book a hit on Web). Of course, Oprah’s backing and the for-a-limited-time-only campaign significantly skewed the scale.

So, once all the PR hoopla surrounding the free giveaways and alternative distribution mediums has dissipated, likely less attention will fall on such promotional launches, causing them to be less successful. That said, “free stuff is good stuff” will remain a popular slogan tooted by many. And that doesn’t mean they’re broke. Who wouldn’t opt for a free lunch?

Similar to the free lunch but buy a drink scheme, an e-content start-up business, Smashwords, is proposing an interesting model that piggybacks on this idea, whereby artists can offer up to 99% of their content for free for “sampling” – an active try-it-before-you-buy-it guarantee. Provided a book is good (and meets the readers’ expectations), I imagine the reader being almost happy to cough up the bucks to read the last chapter or two of the freebie book they’ve been sampling (and are dying to read the end of), and wash down her meal.

Even once the buzz bubble bursts, it is reasonable to assume that there will still be a huge, solid audience of people who are hungry to read, watch and listen to free stuff that they normally wouldn’t go out and buy – Napster, YouTube and MySpace make this clear. Such an offering increases an artist’s audience and opens up all sorts of doors for add-ons, including events and merchandise.

Sure, distribution and retailing methods are being tweaked to meet evolving technologies. This isn’t the first time the book publishing industry has had to bend to meet change.

Turning to the past to predict the future, worth considering are the significant shifts that have affected the book industry. As Mary Ann Gillies lectured to the MPub class at SFU on March 4th, 2008, the profession of the literary agent grew out of new needs faced by an evolving market in London, circa 1860. The market was growing – literacy rates had increased, which, in turn, led to more readers and buyers. To meet the growing needs of the market, more publishing houses set up shop and suddenly there were many players in the book publishing industry, both in London and New York. So, quite suddenly (as with the current development of the electronic revolution), there was a large, broad market to be exploited through the multiple forms and formats to meet the different price points among the different audiences. At the turn of the 20th century, there was the option of Everyman’s Library or large format, hard cover, illuminated texts compared to the dawning of the age of the Internet at the turn of the 21st century where mass-market paperbacks, four-colour, large format, hardcover coffee table books full of illustrations and images and free-to-download e-editions are all readily available.

Point being, there is already a potentially large audience for any given book but it is more a matter of reaching the several smaller clusters within that audience through both conventional and untraditional channels that most appeal to that segment. The publisher as a one-stop-shop, the faith that your fans will pay model and the 3rd party pays for your free lunch phenomenon are all potentially viable models in the book publishing sector, as Madonna, Radiohead and Prince, respectively, have proven in the shifting music scene. The challenges facing book publishers are where and how to distribute content. Unfortunately, there’s no golden formula that can be turned to but, on the optimistic side, there are a variety of formulas to employ – it’s just a matter of finding the one that best fits.

Sources:

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“Anger at Prince free CD giveaway.” BBC News. June 30, 2007. http://news.bbc.co.uk/2/hi/entertainment/6256732.stm [accessed March 3, 2008]?

Cook, Brad. “TMO Reports - Analyst Sees Subscription-Based Music Services Eclipsing Pay-Per-Download.” The Mac Observer. May 17, 2005. http://www.macobserver.com/article/2005/05/17.12.shtml [accessed March 3, 2008]?

Dodge, Don. “Napster - the inside story and lessons for entrepreneurs.” Don Dodge on The Next Big Thing. October 3, 2005. http://dondodge.typepad.com/the_next_big_thing/2005/10/napster_the_ins.html [accessed March 3, 2008]?

Dubner, Stephen J. “What’s the Future of the Music Industry? A Freakonomics Quorum.” The New York Times. September 20, 2007. http://freakonomics.blogs.nytimes.com/2007/09/20/whats-the-future-of-the-music-industry-a-freakonomics-quorum/ [accessed March 2, 2008]?

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Strength of this analogy --jmax, Mon, 31 Mar 2008 00:16:38 -0700 reply

Here we have an essay based on an analogy—between the new world of the music business and the future world of the book business. It's a choice topic these days, because so much interesting and evocative stuff is happening on the music side, and we are keen to imagine how the same scenarios might play out on the books side. But, to be complete, and responsible, isn't one of the crucial questions simply one of how far you can take the analogy itself? Where does the analogy break down? Where does it hold up? Book retailers do look a bit like CD stores; and the manufacturing and distribution businesses are pretty similar, but how far can you go beyond this? Is there really any similarity in how we respond to and consume these cultural products? Maybe.

Toward the end, you allude to the rise of literary agents as a response to the expanding complexity of the market. If this is indeed true of today's digital markets, then there should be a trend toward more new intermediaries (like the DADs that Mike Shatzkin talks about)—and that scenario runs somewhat counter to the disintermediation narratives of Radiohead, Madonna, et. al. Perhaps, as you suggest at the end, we live in a world of vast possibilities; all we need is to find the best one for any one situation. Easier said than done?