I found this while seeing if I could find stats about the results of Harvey Danger’s experiment in allowing their latest album to be downloaded for free (apologies for those who find it monotonous, as I’ve posted about it twice already in the last couple of months, but I find it a great way to try to find hard data behind all the press spin about music and the net).

One of the members of the group, Jeff Lin, has two very revealing posts on his blog about the economics of the modern music industry from the point of view of the artist, rather than the (copyright-owning) labels. They are over a month old, but I missed them at the time.

The first has a noteworthy point about using the net to distribute music:

People will often fixate on the low conversion percentages, but what matters in the end is not the percentage, but the absolute number, since our marginal costs of distribution are so low.

Obvious, but it is a truism that anyone looking at economics of digitisable material should pound into their head: it’s easy to make a profit on a transaction when your marginal costs are essentially zero.

The second point is this:

Second, in order to fail you need to define success. Most labels define success in terms of albums sold, or more generally, profits made. For most artists, however, profit (money) constitutes only a small part of success. Reaching a large, appreciative audience is equally — if not more — important.

We’ve spent almost no money on promotion (in fact, we were so late getting CDs back from manufacturing that album reviews are only now coming out), and yet in a little over a month the entire album has been downloaded over 92,000 times (that we’ve been able to track). Will all of those people become fans? No. Will a large number of them listen and delete? Absolutely. But some percentage will (and have) gone from “never heard of you” to “real fan.” And any artist knows that it’s the real fans that are your lifeblood, that will sustain you over the long haul — two, three albums from now.

I think this is the key. The important point seems to be about getting known. Previously, it was the radio that did this. You’d hear a single, and then go to the record store to find it. Now, I think the net is (or soon will be) the way. Think about it: it’s easier to get something onto the net than onto radio. Radio is also a linear format with limited space: you can only fit so many songs per hour. The net is parallel, random-access, and space is not a problem. I’m sure many people (like me) don’t get as much chance to listen to the radio as they do to sit at a keyboard.

I’ve read that bands make most of their money from touring and other non-record related income streams. If that is right, then free downloads of songs is just advertising for the band, and essentially free advertising at that. It’s about getting the artist known, and getting fans. It’s the fans that will then deliver the real return on investment to the bands/artists.

The problem, of course, is that this disintermediates the record labels; hence the current brouhaha.