The Musician's Business Model: Lessons From Mike Masnick and Trent Reznor

Obviously it's been a while since I've posted here and for that I apologize, but I do have some updates for you that I hope you'll find interesting and exciting.

Throughout my research I've read a plethora of Tech Dirt articles by Mike Masnick, who debunks a lot of myths and rumors about the ethics and economics of the music business. I will admit, I don't know much about Masnick's background, but he seems as informed, if not more informed, than any record label executive I have ever met. Anyway, as I was browsing through Nielsen Soundscan numbers (for those of you who don't know, Nielsen Soundscan tracks all music sales) I ran across a video lecture from Masnick in which he talks about Trent Reznor's (lead singer of Nine Inch Nails) business model for selling music. It's actually really simple and looks like this:

CwF (connect with fans) + RtB (reason to buy) = Business Model ($$$)

Let's run through these elements one by one using one of the Trent Reznor business models Masnick displays in his video lecture. The album we're going to examine is called Year Zero. As a brief introduction Year Zero was written in 2007 as a concept album. The album's goal was to criticize the current state of the United States government through presenting a dystopian view of the world in 2022 and featured the song "Capital G" that seemed to directly criticize President George W. Bush. At this point in time Reznor and Nine Inch Nails were signed to a major record label and Year Zero was to be released on this major record label.

Step 1: Connect With Fans (CwF)

Reznor connected with fans in two ways: 

1. He hosted an internet scavenger hunt that helped to enhance the fan experience beyond the music Nine Inch Nails was putting out. This scavenger hunt helped to engage and excite fans for the release of the new album and gave them something to do in anticipation for Nine Inch Nails's upcoming tour.

2. For every tour date Nine Inch Nails went out on Reznor had USBs with new music on them hidden in bathrooms all across the world. Fans found these USBs and were encouraged to share the new tracks online with others. This drew fans out to the tour in droves and further unified the fan community by strengthening their relationship to one another and to Nine Inch Nails as a band.

Step 2: Reason to Buy (RtB)

Reznor had the attention of his fans, but now he needed to find a way to profit from that fan connection: he needed to give Nine Inch Nails fans a reason to purchase a physical album. He did this through creating a CD that changed colors as it warmed up. As Masnick points out, this color change is something you cannot duplicate in an MP3 format. And although this color change doesn't seem like a big deal, the album sold over 187,000 albums in its first week out and reached number two on the Billboard top 200 charts. That sounds like a win to me.

Step 3: Profit

Needless to say, this fan connection combined with a reason to buy a physical copy of Year Zero led to some nice profits for Reznor and Nine Inch Nails.

Masnick seems to think that Reznor's strategy was brilliant, and I cannot help but agree with him. Unfortunately Reznor's record label and the RIAA did not find this approach amusing. The RIAA began hunting down fans who were sharing these new music files online which became problematic for several reasons. First and foremost, the RIAA seemed to forget that it was Reznor's choice to hand out his music for free, but instead of punishing Reznor or the band for their actions, the RIAA punished Nine Inch Nails' fans for sharing music that was already given to them for free. Second, instead of embracing the free marketing campaign Reznor had presented them with, the "big four" record labels did what they always do: they fought against a technology that could help them move forward into a new business model. Furthermore, when the RIAA started treating NIN fans like criminals instead of like regular people, they created an animosity between the recording industry and those who purchase NIN's music. Fans started seeing record labels as a nefarious entity instead of as a business. This led to a state of distrust that major labels are yet to bounce back from.

But the damage was already done and Reznor was ready to test his business model again. Nine Inch Nails separated themselves from their record label and continues to operate under this business model successfully today.

If you want to learn more about Masnick's point of view and Reznor's strategies, I recommend that you read Masnick's article here and view the entire video lecture below.