SPAT: How to Save the Music Industry

I think I know how to save the music business. There’s a dead-simple business model that will funnel money to talent, work with the Internet’s capability for zero-cost distribution rather than fighting it, and allow the record companies a role without “intellectual property” protection or DRM.

I call it SPAT for short. This can have either of two expansions: “Strike Price And Timeout” or “Street Performer And Teaser”.

Here’s how it should work:

1: You front the money to produce a song. Or an album. Or whatever marketable unit of music you think you can sell. (It’s the 21st century. Production equipment is cheap. You can do better sound engineering in a basement today than a million-dollar production outfit could have during most of the 20th century.)

2: You make a teaser clip. If you’re selling a single, maybe it’s 15 seconds out of 3:05. If you’re selling an album, maybe it’s a 3-minute audio montage sampled from the album tracks. Maybe it’s a video. Maybe it has voiceovers by the performers on it.

3: Throw the teaser on the Internet. Within months after this model is generally understood, there will be aggregation sites that do nothing but host teasers. Some will make money by selling advertising to people who want to reach music consumers. Others will be fan/hobbyist suites with a mission. Still others will be run by record companies — see below for discussion.

4: The teaser clip has a pitch at the end. “Free this music! When we get X dollars in the tip jar at the specified URL on our fulfillment site URL, we’ll throw the music on the Internet as a free download. Offer expires at time T.”

5: On the fulfillment site, the pledge jar shows how full it is when you look at it. You can add a pledge to the jar there.

6: The payment system on the fulfilment site has to deal gracefully with three cases:

6(a): The timeout expires before the pledge jar is full (“It busted!”). All pledges are returned. All parties lose.

6(b): The timeout expires after the pledge jar is full (“It boomed!”). The pledge jar is emptied and a free download link to the work appears beside it. Subsequently, anybody can do what they like with it — throwing it on a bunch of BitTorrent trackers will probably be a popular option.

6(c): The payment system must fail safely — that is, if the pledge jar fills, but the work does not ship, consumers don’t lose money.

All three cases are important! A large part of the point of this model is to eliminate from consumers’ thinking any perceived risk that they might throw money down a hole.

8. Assuming 6(b), use your profits to produce the next work. Now you can afford more studio time, better equipment, side players, and maybe some extra marketing. You can probably also set a higher pledge threshold, and/or a longer timeout.

For an artist, the single key business decision is what strike price to set for a given work — career-building will consist of earning a reputation that allows you to set a higher strike price than your previous ones. Because consumers are probably less sensitive to the timeout length tan to price , I’m expecting there will be convergence on a fairly small set of standard timeout periods.

Various interesting reputation games could be attached to SPAT to make the pledge jar fill faster. For example, large pledges might earn buyers perks like their name in lights near the download point for the work, or even a mention in some credits.

Record companies still have a role, if only because somebody has to be trusted to refund the pledges if the jar doesn’t fill and to actually ship the album if it does. Of course, they can continue doing conventional record-company stuff; branding, marketing, A&R, running studios. But there will be three big differences. One is bad: the
upside is bounded (you don’t collect ‘extra’ revenue from an unexpectedly successful work).

On the other hand, the other consequences are good. Distribution expenses go as near zero as makes no difference. There is no requirement in the model for DRM or IP protection of any sort; the record companies get to stop spending lots of money on lawyers and lobbyists and (more importantly) get to stop being hated by the people they most want as customers.

There’s no intrinsic reason SPAT couldn’t work for movies and other content as well as music, but it’s better adapted to media where the money you need to front to produce as saleable work is relatively low.

SPAT is, of course, a variant of the well-known Street Performer protocol (SPP). The key difference is that the teaser operates as both marketing and as a plausible promise that the artist already has a deliverable work, changing consumers’ risk assessments and making them more likely to buy. This addresses the most serious weakness of other forms of SPP, which is that the large information asymmetry between buyer and seller acts as a disincentive to buyers.

SPAT could be substantially improved with one piece of technical infrastructure. That is a pledge instrument which would give the receiver the right to a given chunk of the payer’s money, but only if called after a specified future date. Such an instrument would further reduce buyer risk.

47 thoughts on “SPAT: How to Save the Music Industry

  1. I can see the merits of this system, however, if i am not mistaken Stephen King tried it with “The Plant” a short of novel that he published piece by piece over the internet and asked readers to show their financial support. I don’t think it worked and after 4 installments, the plant just died :)

    I.

  2. Wow. That is a stunning idea.

    I think you may be underestimating the cost, not only in gear but in location, expertise, and time, needed to get a quality recording. This wouldn’t inhibit this system completely, since people buy bad-sounding EPs all the time, but things aren’t quite as rosy as you say.

  3. Hey, good idea!

    David: I think the point is that the gear is now cheap, so only the expertise and time matter (and they do still matter, of course). But if gear is cheap, expertise is much easier to acquire.

  4. >I don’t think it worked and after 4 installments, the plant just died :)

    Yes, some offers will bust for lack of interest. I expect that.

  5. Very interesting idea, but the record companies would NOT make more money in the long run by using this concept. Remember that the music industry is a money-obsessed business, full of conartists and crooks, so SPAT is unlikely to ever be implemented by the major record labels. However, I could imagine an up and coming unsigned band doing it. And I tell you this, Radiohead could have made an absolute fortune if they had released In Rainbows in this way – they could’ve had an incredibly deep pledge jar!

  6. Musicians could take a cue from open source development models if they were looking for ways to make money in the digital age. Most people who make money on open source do it through hand-holding and support. The obvious analogy in the music world is live music. Plus, many open source projects have stylish logos that look good on T-shirts. As it happens, lots of bands have stylish logos that look good on T-shirts.

    On the other hand, O’Reilly sells really nice books that serve as de facto manuals for open source programs. Artists could release Creative Commons tracks for free, but offer the physical package, such as a CD or vinyl, as a premium product. (This is what Nine Inch Nails did for their latest album.)

    The model described above seemed rather complicated to me. I think Occam’s Razor will favor musicians making money through live performances, selling T-shirts and other swag, and deluxe packages for die-hard fans.

  7. >Most people who make money on open source do it through hand-holding and support.

    I think you’re stretching the notion too far. Band t-shirts are analogous to project t-shirts, but neither is “service and support”; I don’t believe there is such a thing for music or novels or any other form of art that can be stored with 100% fidelity.

    The problem with tied goods like physical packaging and t-shirts is that they’re low-margin, low-volume goods. Some people wishfully believe that a band can live off that income, but I’m almost sure it’s impossible from thinking about the run rates and I’ve never seen evidence otherwise.

  8. >The problem with tied goods like physical packaging and t-shirts is that they’re low-margin, low-volume goods. Some people wishfully believe that a band can live off that income, but I’m almost sure it’s impossible from thinking about the run rates and I’ve never seen evidence otherwise.

    The main problem with CDs and T-shirts is that you have to pay for a certain amount of them, even if you don’t sell all of them. Perhaps bands could employ some kind of Just In Time manufacturing, so they don’t get stuck with unsold inventory.

  9. >Radiohead could have made an absolute fortune if they had released In Rainbows in this way

    I think so, too. Contemplating what they did right and wrong was part of the thought process that led me to SPAT.

  10. It seems to me that you’re asking people to pay for inconvenience: “Maybe I’ll get my song in a month, and then I’ll pay for it.” It’s an annoying game.

    Downloading copyrighted content is cheap but a little time consuming. You’re stuck competing with that.

    On a gut level, the “PBS” approach sounds worth a shot. Give it away and ask for donations. Distribution is cheap and you get to keep all the money you receive. But what do I know. :)

  11. This is called the Coasian Solution (for it’s creator, one Ronald Coase). A friend of mine and I were thinking about implementing it as a startup, but it turns out there are already people doing it. Also, the record industry is not yet dead enough for this to work. You need music authors looking for other revenue models on a widespread basis before the time is right.

    http://en.wikipedia.org/wiki/Public_good#Coasian_solution

  12. >This is called the Coasian Solution

    Not the Coasian solution, but a Coasian solution. Yes, I was influenced by Coase’s theorem. (I once described it to a friend as the Killer Joke of political economics — you can spot the people who get it by the fact that they turn into libertarians.)

    Who is actually implementing this?

  13. Hmmm, it looks like the various co-opsyou see, (such as co-op groceries and youth hostels) appear to be implementations of Coase’s theorem. I find it interesting that the people who participate in owning and operating these businesses are nominally left-wing (even outright socialists), yet they are using free-market means to achieve their goals of creating what they believe to be a more equitable society.

  14. >I find it interesting that the people who participate in owning and operating these businesses are nominally left-wing (even outright socialists), yet they are using free-market means to achieve their goals of creating what they believe to be a more equitable society.

    How else could it be? You might as well be surprised that they “use” Newton’s Laws of Motion. Only certain things are possible, and sustainable, in this universe, much as humans might like to believe otherwise.

  15. >On a gut level, the “PBS” approach sounds worth a shot. Give it away and ask for donations.

    I can’t wait for the day when “Dark Side of the Moon” is interrupted for a pledge drive!

  16. For 6a (if implemented by a record company), maybe they could add the names to a monthly drawing for prizes or add points in a karma system?

    Also, according to the wikipedia entry for “The Plant” it looks like it was somewhat successful. Perhaps it would have worked better if King asked for a strike price instead of $1 for 75% of the downloads.

  17. Eric, I indeed thought you may have had Radiohead somewhere in your mind while writing this. It could be argued that they would’ve made more money using the SPAT system rather than the ‘pay what you like’ system they actually did implement. However, explain this to Thom Yorke and I very much doubt he’d give a shit; he’s rich and famous already, and Radiohead have such a massive (almost cult-like) following. For them, it was probably just a little fad or gimmick they stumbled upon – I doubt in releasing In Rainbows online in this way, the band had received much marketing advice, but what does it matter when you happen to have made what I take as one of the finest albums ever recorded, OK Computer :-)

    Anyway, keep up the blogging Eric, much of it has been rather thought-provoking :-)

  18. “Very interesting idea, but the record companies would NOT make more money in the long run by using this concept. “

    More money than what? You don’t say what you are comparing to.

    In my estimation, the record companies are going to go broke in the long run if they stick to their current business model.

  19. “if i am not mistaken Stephen King tried it with “The Plant” a short of novel that he published piece by piece over the internet and asked readers to show their financial support.”

    Not the same business model at all.Read the Wikepedia article.

    In particular, King provided no mechanism for returning everyone’s money if the project failed to reach the threshold he had set for it. The project did fail, and paying customers lost their money and ended up with an unfinished novel.

    ESR’s proposed system has no downside. If you contribute money to the project, there are only two possible outcomes:

    1. The project succeeds, and the entire work becomes available for free download. You get what you paid for.
    2. The project fails, and you get your money back. You lose nothing.

    I think some kind of third-party escrow broker would have to be involved in order to assure customers that their money would be refunded in case of project failure, but otherwise the concept seems quite workable to me.

  20. >add points in a karma system?

    Karma exchangeable for what?

    >In particular, King provided no mechanism for returning everyone’s money if the project failed to reach the threshold

    Yes, and that was a problem.

    >I indeed thought you may have had Radiohead somewhere in your mind while writing this

    I was specifically trying to debug Radiohead’s tip-jar-like model.

  21. I suppose that artists wouldn’t need a lot of money to subsidize a recording if they set up a digital home studio. The costs would be especially low if they used exclusively open source software as much as possible, such as Ubuntu Studio. Since they barrier to entry is so low, this may encourage more artists to experiment musically. But on the other hand, this may result in music that is less than listenable.

    But on the invisible hand, artists who consistently made bad music wouldn’t get pledges.

  22. To make a good recoding you need the right kind of room! Even if you could buy a DAW for the price of a Furby — and you can’t — you’ve still got plaster walls and resonances and irritated neighbors. Like I said, this probably doesn’t matter that much. However, while recording costs have come down by one to three orders of magnitude, they’re still quite high, and Moore’s law isn’t going to help significantly any more. The costs now are space, expertise, time, and analog electronics.

    (A couple of good mics and a Firewire interface will still run you about $1k.)

  23. I like the idea, but I’m worried about how to provide a business model for the folk who run the SPAT servers. It seems like an unglamorous job. People would do it for money rather than love. I forsee big business buying up and consolidating SPAT servers into one or two huge gateway companies that would effectively tax artists. That is I forsee history repeating itself.

    Have a look at the “copyright clause” in section 8 of article 1. To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

    That authorises Congress to legislate and spend to provide Authors with a business model, by building and funding Patent offices and copyright offices. If it were stretched, taken as a grant of authority to achieve the same ends by running a SPAT service, would the courts strike it down?

    Striking it down is the courts way of saying “You need an amendment to let you do that.” Holding that a minor tweak, to accommodate techical change, requires a constitutional amendment seems unlikely.

    The issue of the business model for SPAT servers is a minor matter compared to arranging for the funding of artists so that they can work full-time on their music. Perhaps the Federal Government could run a SPAT service funded out of general taxation without artist fees or administration fees. The idea that the whole of the tip jar goes to the artists without any fee to a middle main might make the idea more attractive to the general public.

  24. Pat, it almost goes without saying; I am comparing it to the current system. I’m not sure I agree with you there; record companies today are making more money today than they were in Michael Jackson’s heyday (mid- to late-1980s), even though less physical records are being sold. Record companies have more up their sleeves than simply selling physical records – these companies are not stupid, they’re not just going to let themselves go bankrupt that easily. The music industry, like most other businesses, is changing over time, and as physical records go out and the age of music downloading continues, the record companies will figure out ways to continue making a shit load of money. Behind these record companies are teams of savvy businessmen. You’re also forgetting that record companies make a lot of money by simply owning the rights to songs. I don’t know, Pat, maybe I haven’t looked at this deeply enough, but I can’t see record companies going broke any time soon.

  25. Pat, everything has its advantages and pitfalls. You can’t just say a system ‘has no downsides.’ Eric never actually claimed that the system was without its disadvantages.

  26. >>add points in a karma system?
    >Karma exchangeable for what?

    A better fate in your next life. Either that or cheap trinkets now.

    Anyway, I’m suggesting points/prizes for busted songs because even though there’s no charge in that case people might get really ticked off when that happens. And there is a ‘cost’ of sorts for figuring out if you really want to leave a provisional tip then finding and leaving info at a site. Granted that’s minimal for music but for written serials there’s a considerably larger cost. I suspect this is why infomercials often say “If you don’t like the Get Rich Quick course then return it within 30 days for a full refund and keep the such-and-such as our free gift”.

    Also, it might be a good signal of quality if there’s some sort or additional penalty for busted songs. One drawback is that scammers would target songs that have a high strike price and/or a short timeout.

    Regarding no upside for unexpected hits, what if the proposal was we’ll post the total in the tip jar *after* the timeout (and keep any surplus if the strike price was met)?

  27. > I can’t wait for the day when “Dark Side of the Moon” is interrupted for a pledge drive!

    Awkwardly, pledge drives that were too invasive or distracting would just get cut out and the cleaner result distributed by an online community.

  28. Sorry, but this is one of the stupidest ideas I have ever heard. Yes you can put together a very credible studio for $20,000 but the real cost is the professional expertise to run it. Professional producers, arrangers and session musicians cost real money and make a huge difference to the finished product. Do the terms ‘amateur product’ and ‘professional product’ give you any expectation? How often does an ‘amateur production’ sell a million copies? Professionally produced product dominates the market for good reason.

    NOW THE REAL PROBLEM
    If you knew anything about music consumers who also use the Internet they want INSTANT gratification. Putting their money in a tip jar and waiting does not cut it for them. Consumer acceptance would be about zero.

    Finally all the profit from the music industry comes from the big sellers. Big record companies are only interested in the multi-million sellers. Occasionally they get a 50M seller. The big sellers fund all their new talent and pay all the bonuses. Putting a cap on the earnings would rob the industry of the profits.

    Don’t make a fool of yourself, stick to things you are good at.

  29. >but the real cost is the professional expertise to run it. Professional producers, arrangers and session musicians cost real mone

    Agreed. All this will be factored into the strike prices.

    >Putting their money in a tip jar and waiting does not cut it for them.

    Consumers wait for new album releases all the time. I’m not going to refuse to buy next year’s Joe Satriani album, not made yet, because it isn’t available now. Your real point is that the escrow accounts for SPAT have to be riskless for the consumer, so that dropping money in the pledge jar is an easy decision and zero cost iif the offer busts.

    >Finally all the profit from the music industry comes from the big sellers

    True. The record industry’s problem, though, is that they’re looking straight down the barrel of no profits at all. Been to a BitTorrent site lately? That’s death staring the industry in the face. SPAT might kick hell out of their present profit margins (or not — I think it would make long-tail sellers more attractive) but it cannot possibly worse than the future they face without it.

  30. RS,

    I like the model. It provides the upfront production cash to make it happen. However there is a different model that is as old as the Medici’s of Florence — The Patron. The video short Big Buck Bunny [BBB] used this model. The production company has done this 3 times now. They are getting ready to do it again for a video game.

    Goes likes this. A Patron ponies up 10% to do a trailer. The trailer is shopped out for distribution rights. Capital is acquired. Once completed the product is sold to the distributor. The Patron gets paid their agreed amount. The folks over at Blender use this as a vehicle to fund 1-3 developers to add extensions to the package. That extension is worked into the product that is sold to the distributor in the end game.

    Seems archaic but it seems to be working for them.

  31. Eric – how is this different from the P# publishing system that Multi-Man, The Gamers and I use to reduce risks on projects?

    We post teasers on games. We say we need this many promises to buy (the P#) by date X to put it on the press, we set the P# for what we need to throw the job in motion plus about a 10% cancel rate, and then we wait until the number gets hit.

    Usually with teasers twice a week about all the fun they’d be having if they were involved in the Super Duper Secret Playtesting sessions, rather than waiting for enough people to commit to buy it.

    Once the product is made, we have inventory and continue to sell on the long tail.

    Indeed, the real problem I have with your SPAT model is that it completely eliminates the long tail/continuing revenue stream from music creation. The reality is that most musicians and most writers make the BULK of their income off of royalties over the accumulated creative product of an entire career.

    What I’d do is a combination of your SPAT model and then sell it as cheap, DRM free MP3s for the ongoing revenue stream, or as donation-ware. Yes, it’s going to get pirated, yes it’s going to get put on BitTorrent. People will still buy it.

    My answer to piracy is to embed the purchaser’s purchasing information into the file. Want to throw my IP onto Kazaa? Sure – hope you don’t mind that the credit card information you used to purchase it is embedded in the file.

    (This shares the cost of distributing other people’s stuff to the point where it might be a disincentive.)

    I will note that my own experiences with donation-ware in games (Minimus) have proven to be on the threshold of being worthwhile. I made roughly the amount of money I’d’ve made for the same number of hours put into a day job doing layout at the local newspaper, and less than I make writing web content for marketing weasels.

    That being said, having known people who were professional musicians, most record company contracts go well beyond being “one sided”. BOHICCA-and-enjoy-the-barbed-wire-we’re-billing-you-for-it comes to mind.

  32. Summarizing the long phone conversation Ken and I had about this:

    >Eric – how is this different from the P# publishing system that Multi-Man, The Gamers and I use to reduce risks on projects

    The teaser part is different in a significant way. Also — and I should have mentioned this on the phone — SPAT lowers the customer’s risk if a project busts. This is significant, as it lowers buyer resistance.

    >Indeed, the real problem I have with your SPAT model is that it completely eliminates the long tail/continuing revenue stream from music creation,

    Yeah, that sucks. But the brutal, ugly truth is that “continuing revenue” is no longer a sustainable option in a world with BitTorrent. This is exactly the problem the record companies are facing; the difference is, they think they can beat it with DRM and lawsuits, but I know better, SPAT is my attempt to salvage something from the inevitable wreck of that model.

    Understand, I’m not describing a future I particularly want, just the future I believe we’re stuck with. Unlike Cory Doctorow or the EFF or FSF and their ilk, I have no ideological investment in “information should be free”; I’m telling you that unformation is going to be free whether or not either of us likes the idea, and those who don’t find some way to cope with that will soon find themselves at the shitty end of a very sharp stick.

    >My answer to piracy is to embed the purchaser’s purchasing information into the file. Want to throw my IP onto Kazaa? Sure – hope you don’t mind that the credit card information you used to purchase it is embedded in the file.

    That won’t work either. Ideologically offended hackers will write tools to break your stenography so people can BitTorrent versions with the stuff they don’t like stripped out. They will do this even if it doesn’t make economic sense for them; principle is involved.

  33. Eric – my take on the ideology of “Information Wants To Be Free” is this:

    Until such time as we move to a post scarcity economy (if, indeed, such an economy doesn’t require perfectly spherical cows of uniform density…), the ideology of “information wants to be free” only works so long as the consequences of spreading that information are minimal.

    If someone really wants to preserve the idea of creative works as a means of supporting creative people (other than through “life as performance art”), then a means of sharing consequences with enforcement and deterrence needs to be made.

    And while most ideologues who blindly chatter “information Wants To Be Free” have all their straw man arguments lined up for lighting with torches, I have one very simple counter argument:

    “If you really believe all information wishes to be free, give me your wallet. The Revolutionary Information Liberation Front seeks to free all your personal and banking information for the better good.”

    Or do you merely believe that information wants to be free only when it benefits you, and you’re just as much a freeloader as any other socialist?

  34. Well, to start with, I’m not an “Information Wants To Be Free” ideologue; in fact I opened my third paper, the one on open-source economics, by trashing that position. (I believe, based on our phone conversation, that you know this and are tweaking me so I’ll say instructive things in front of our audience. OK, I’ll play…)

    >If someone really wants to preserve the idea of creative works as a means of supporting creative people (other than through “life as performance art”), then a means of sharing consequences with enforcement and deterrence needs to be made.

    Yes, and if wishing could make it so, I’d have a pony.

    Look at it in terms of enforcement costs. A form of property is only sustainable when the expected return from it exceeds the cost to defend it. That’s why, in a desert, people don’t develop and enforce property customs about random acres of sand, but do develop and enforce them about waterholes.

    What we’re seeing happen is that enforcement of property rights in pure bits is asymptotically approaching “impossible”. DRM doesn’t work, and there are intrinsic reasons it can’t work. As a direct consequence, among people under 30 or so the social support for IP rights in bits is gone. Dead. These are facts. I don’t particularly like these facts, but my grudge against entropy isn’t doing anything to repeal the laws of thermodynamics, either.

    IP in pure bits, it turns out, was economically sustainable only as long as the cost of distribution was in the same general order of magnitude as the value of the work. Frictionless distribution ends that game. (Note that there are no “ought” claims in the preceding paragraph. I’m just reporting what happens as certain cost-vs.-payoff curves shift.)

    You want to live in a universe where creative people can capture the full positive externalities from their work. So do I. Our desire is irrelevant; to paraphrase Dick Cheney, you have to do economics in the universe you have, not the universe you’d like to have. That’s why SPAT only tries to collect revenue during the period that the bits are undistributed, because in a an Internetted world that is the only point at which the artist’s defense costs are less than the work’s expected value.

    >“If you really believe all information wishes to be free, give me your wallet. The Revolutionary Information Liberation Front seeks to free all your personal and banking information for the better good.”

    If you tried to take my wallet, we’d have a very physical conversation about defense costs.

    (If the preceding sounded like mere snark or humor, think again. The key economic point that makes wallets different from the latest Madonna single is available there for inspection.)

  35. Yeah, that sucks. But the brutal, ugly truth is that “continuing revenue” is no longer a sustainable option in a world with BitTorrent. This is exactly the problem the record companies are facing; the difference is, they think they can beat it with DRM and lawsuits, but I know better, SPAT is my attempt to salvage something from the inevitable wreck of that model.

    You can bet your ass that George Gershwin’s heirs, Disney, and the Bono family will fight tooth and nail to make sure that doesn’t happen.

    SPAT is a wonderful idea that will unfortunately be starved of large-scale implementation. A walled-garden model for the internet, wherein you’re simply not allowed to write just any old application on top of the network, will come first. Already ISPs are optimizing their networks for some applications and pessimizing them for others, according to what they see as “legitimate” usage patterns. Just try seeding that BitTorrent download over your Comcast cable connection.

  36. >You can bet your ass that George Gershwin’s heirs, Disney, and the Bono family will fight tooth and nail to make sure that doesn’t happen.

    We can’t teach old dogs like the Disneys and the Bonos new tricks, and we really have no right to force them one way or another, but you can certainly convince newer musicians that SPAT is a good idea.

    The way I see it, amateur and start-up musicians (or musicians with enough fame and fortune already) could certainly make use of the SPAT model, and it could work out really well for them. If applied properly, the SPAT model will provide some extra income to invest into better equipment, future production costs perhaps even to the point of becoming a professional independent studio, etc. Not only that, the musician has a means to market himself and develop a reputation without unreasonable out-of-pocket expenses.

    I have a certain prejudice against this sort of production/distribution model, though, simply because I can envision ten of Joe Billy Bob’s cousins from Alabama recording themselves drunkenly howling over a I-IV-V progression over a campfire.

    A professional, independently-operated studio, on the other hand, wouldn’t have this issue. Plenty of talented musicians — Steve Vai and Frank Zappa for example — do or did run their own production operations outside of the realm of the big name labels, and make more than enough money off of which to support themselves and their families. Those who understand the business side as well as the artistic side of the music business are bound to profit the most from it.

    If the SPAT model reinforced the idea of being a lucrative businessperson as well as a talented performer, I think it could really help start-up musicians to take off, and amateur musicians to see a little bit of beer money for their work. At the very least, it’s a good thing because it encourages all people — even those who for one reason or another cannot or will not perform live — to make themselves heard, and to be paid and recognized for their work!

    I guess I would have to say that I have mixed feelings about SPAT. Brilliant in theory, but would it really work in practice? Couldn’t hurt for someone to try!

  37. I had the same idea a few years ago, but I wasn’t interested enough to really think it through. Great minds I suppose. haha

    I thought you were a supporter of intelectual property though.

  38. The Stephen King Plant experiment is a good example of how to do this and get it completely wrong. Rather than set a realistic fixed price for the tip jar he went for a paid percentage of downloads. If I recall correctly he made a shed load of money out of the thing, but did not hit the pay ratio he wanted.
    Not exactly a failure from his perspective – and don’t forget that the man is far from being an idiot.

    Also the book stank – pity since the idea was good in principle and his writing is pretty passable normally.

  39. the music industry has a little known economic structure which makes the internet/free downloads even more viable than realised. something i ran across years ago: most bands make the vast bulk of their money from gigging, NOT from record sales. ever wondered why all these huge-selling artists keep touring? virtually all of the record sales money goes into the mechanism’s pockets, but the sales create fans, the fans turn up to the gigs, and the bulk of the gigs’ money goes to the band.

    that is, the (band’s) money lies in the social experience not merely the music.

    an interesting real-world trial of this model is the Arctic Monkeys. the music is free. the social experience remains full price. the band does well out of it as a result.
    rather better than normal actually, as their fanbase is proportionately larger because prospective fans have free access to the “hook” rather than having to bet money upfront that a CD will “grab” them.

  40. Now this article is interesting. You seem to be more a Friedmanist than a Misesist when it comes to ecomonics, yet this SPAT idea seems to be based on the time preference theory of capital investment: interest is the price of the time between paying for the production of something and making money out of it. It’s a very pure kind of time-preference approach to investment. Interesting.

  41. >what about those Libertarians who explicitly reject Coase’s Theorem?

    I read the article. I think they’re misreading Coase, who was not making the normative claim they attribute to him. Coase’s Theorem doesn’t say we should treat externality problems as though priority of ownership doesn’t matter, it says that low enough transaction cost lead to efficient outcomes regardless of how we assign priority. The difference is significant.

  42. >It’s a very pure kind of time-preference approach to investment. Interesting.

    You’re right, it is. I don’t consider the Friedmanite/neoclassical approach and the Austrian one to be opposed. Rather, I consider them alternate descriptions of the same underlying reality, emphasizing different aspects but fully complementary. I will cheerfully use the tools of either.

  43. So I decide I want a piece of music after hearing the teaser, but I guess that it will be fairly popular and so don’t give any money on the basis that some other fools will, and then I get the music for free. Aside from fools, where is the incentive to tip?

    The other problem I see is that you are leveraging a zero-cost, instant delivery platform to deliver some time in the future. maybe.

    I hear a tease of a new album I want, but I have to wait a month to see if I can even buy it at all?

    Either I misread, or this is doomed to failure through a lack of plausible incentives for rational consumers, and delivery times longer than going to a CD shop several countries away.

  44. Chris Jones: All you’re telling me as that you’re at the edge of the fan base for whatever music or group you’re describing. SPAT depends on there being “rational consumers” who value getting the product as soon as possible. This doesn’t seem unreasonable, based on my experience of music fans — but, as you say, the model collapses if I’m wrong about that.

  45. Bruce Schneier and John Kelsey described this idea under the name of the Street Performer Protocol ten years ago; see the Wikipedia article. It was in fact already in use in the 18th century (Mozart used it, so did Samuel Johnson) under the name of “publication by subscription”.

  46. >Bruce Schneier and John Kelsey described this idea under the name of the Street Performer Protocol ten years ago;

    I gather you didn’t make it to the paragraph where I described the key difference from SPP.

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