Is Wu-Tang Clan’s New Album A Look Into Future Music Industry Sales?

The only copy of "The Wu - Once Upon A Time In Shaolin"

When Wu-Tang Clan announced recently that they’d be pressing only one copy of their upcoming album The Wu - Once Upon A Time In Shaolin and would put it up for auction after a museum listening tour, the general thought of music industry insiders was that this was a giant publicity stunt.

Well, stunt it is that’s working beautifully in raising the group's visibility, but it’s also an excellent case study in one of the principles of the Economic of Free, a theory put forth a few years ago in Chris Anderson’s book called Free: The Future of a Radical Price. Whether they know it or not, Wu-Tang is proving that the little understood second principle of the concept works like a charm.

While Anderson doesn’t outline the concept of the Economics of Free (E of F) specifically like I’m going to in his article, breaking it down into the following two principles makes it easy to grasp and see in action. Let’s take a brief review in how E of F applies to music sales in the world we live in today.

The Two Kinds of Products

First understand that the typical artist has two kinds of products; infinite and scarce. Typical infinite products are music or videos in a digital form, which cost nothing to reproduce. Scarce products include tickets to live shows (not very scarce, but more so than digital music), custom CDs and CD box sets, signed merchandise, exclusive access to musicians, backstage passes, private concerts, and anything else that has a limited supply.

Giving Some Away

Keeping that in mind, Principle #1 is “Give some or all of your infinite products away for free in order to charge for the more scarce ones.” We see this all over the web every day in the form of the many “freemiums” that are offered. For instance, sign up for the free tier of Pandora or Spotify, and if you like it, you can buy up to the next level of service that makes it ad-free with better audio quality.

Instead of using money, many Principle #1 transactions revolve around social currency, like giving away a free download or exclusive content in exchange for an email address. That allows the record label, artist or band to continually offer other products that you might buy later that potentially carry a higher profit margin. Read more of Forbes.

Why Free Is So Misunderstood

Every musician wants to be paid for their "art," and there's an understandable reluctance to give it away, regardless if it's being pirated or not. Sometimes giving it away is one of the best marketing tools you have at your disposal though, even though it might seem counter-intuitive. We see a form of this every day in supermarkets and department stores with "loss leaders" at prices below cost to get customers in the door to buy products at regular price.

One of the basic tenants of Music 3.0 is a business theory called “The Economics of Free” (or EoF). In M3.0, EoF encourages content owners to give some of their products away for free because, if done correctly, you can increase your market size greatly. This theory is very misunderstood, since there's more to it than simply giving your music away though. In this excerpt from Music 3.0: A Survival Guide For Making Music In The Internet Age, you can see how and why EoF works.
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"You, the artist, have two types of products: infinite products and scarce products. Infinite products would be your music, especially in digital form. Physical products like CDs don’t fit in here, because it actually costs you money to produce them (the CDs, not the music on them). Digital music is easy to copy and steal, and just as easy to give away.

Scarce products are tickets to live shows, access to musicians, signed merchandise, backstage passes, private concerts, custom CDs, CD box sets, time spent with you, writing a song for a fan willing to pay for it, and anything else that has a limited supply.

So to take advantage of the Economics of Free, the artist must do the following:

1. Set the infinite products (or just some of them) free. Put them on a Torrent site, Facebook, YouTube, and anywhere you can. The more you get it out there, the greater the publicity and the wider the visibility. This makes the scarce products more valuable.


2. Because of the free infinite products, you can now charge more for the scarce products. Before Number 1 is implemented, access to the artist or backstage passes might not be worth anything, but now they are. Before Number 1, maybe no one wanted your CDs or vinyl albums, but now they’re valuable as a collector’s item, as are the box sets.

Setting your infinite products (your music) free expands your tribe. As your tribe expands, the demand for your scarce products grows. In M3.0, an artist that sticks to the ways of M1.0 through 2.5 will be relegated to a small audience forever."

For additional excerpts from this book and others, check out my website.

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