Just a Thought

Does Freemium Work?

The freemium business model was articulated by venture capitalist Fred Wilson on 23 March 2006:

“Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base.”

Does it work?

Well, recently we have shifted a shitload of t-shirts, 1000 copies of our last EP and have been commanding gig fees of around £1000 each, and i think a lot of this has been possible due to us offering our entire catalogue of music for free download, as well as other things of course.

Seth Godin i think is a great example.
You can download all his books for free. You can even download mp3s of him reading his books to you for free! Sometimes weeks before they are released in hard copy.
Yet his books are still best sellers every time.
His books cost around $10.
Then he has the next level product, for businesses – his DVD pack at a measly $800(!)
Then the Premium product at probably $20,000, Seth will come and talk to you.

To put this model to work as a band we could:

FREE: MP3s of all music / stickers / etc.
£10 CD / Tee / gig ticket
£25 premium box set product
£1000 book the band

This is currently what i am operating for Sicknote and it seems to be working well.
I aim to put this model to work for all bands on Tantrum Records soon.

Now the next key thing is Growth. How can we grow the buzz, being free will obviously help things spread – but to what extent? How can we measure this? What can we do in order to help things grow further? What exactly does being FREE achieve?
Things i will talk about soon. But please post your thoughts below as i’m in the process of trying to work out all of this and will welcome any help.

5 thoughts on “Does Freemium Work?”

  1. Love It. I can see the cruel record industry giants crumbling away because of they’re greed and poor understanding. The power is easily put back in the hands of those who deserve it. All you need to do is put in the effort, and if you really want something to happen then as you have shown Jason, you will get what you deserve.I’m glad to hear it’s working for you, tantrum and sicknote.

  2. The labels are still fighting back when it comes to free music (witness the IFPI mashing up Pirate Bay in Sweden, with talk of prison sentences for the site’s operators). There are still millions to gain for the industry to keep the pressure up even if they eventually lose online sales completely. But there are years to go before that happens, I think. (110 million paid for downloads in the UK alone last year).In the meanwhile, the industry is perfecting the ancient art of PR, which is the new BIG PROBLEM for the small label/artist. The old big problems used to be recording, manufacture & distribution, which were all hugely expensive. In the new wild west it’s PR, which is possibly still cheap or free if you have a good imagination, plenty of help & plenty of luck, but otherwise is expensive (posters/flyers/adverts/freebies/PR companies/agents etc all cost & need to be maintained over months, years sometimes). With the added aspect that PR moves like old A&R used to move, with that rarified word of mouth thing that encourages movers & shakers to hitch their wagon to your mule ( a beautiful image, I’m sure). I’m not sure how much power the blogs have right now, no doubt it will grow for some, but there are so many one man operations I can’t see how the plethora of opinions & sine wave B line remixes (pet hate!) can do much more than frustrate people looking for good sounds. And even really successful myspaces or facebooks are limited because of the sheer quantity of musicians trying to sell their shit.My own take is to do everything that’s free, via the internet, but bear in mind that some expense is unavoidable, unless you’re after small business of the year awards where you try to sell off the back of everything you do with sponsorship deals, rotating ad’s on the band’s van, ad’s on the back of the Ts, shares & investment opportunities for local business etc. But is that what you started in music for? I know Johnny Rotten’s selling butter now, but is that where we all end up?The problem with ‘freemium’ is the journey leads you to the same market as everyone else. And that particular road is already getting clogged up. Whatever unique & wonderful thing you have to sell will be just as interesting if you go the more trad route, in fact, it’s the music & artistry that’s crucial, whichever way you go. That and who you know.That’s for a farthing…for a penny: the real end of the music biz will be when unique artists are redundant as every family will have at least one good singer or characterful uncle & we all make our own music (like the old days) or… there is so much music awash in the world we’ll all be sick of it & silence will be the new Switch remix.

  3. Thanks for sharing! I’m glad it’s working and I also see a future in this kind of business model for Independent artists and labels. I think that people should also look for the fact that as the world does become more clogged / overrun with music, consumers will look for filters, just as teens back in the day starting listening to disc jockeys for their music recommendations. Nowadays it is music bloggers, Pandora or iTunes recommendations software, or even good old links from friends via email or Last.fm etc.Being nimble and owning your own music (i.e. being independent & self-published) is going to hold the key to going with ideas such as this, and of course we will see labels try to imitate but it will likely be too little too late….. but that’s half the fun 😉Lee.

  4. Tim Landon: your analysis is spot on, however, I’ll have to take issue with you when you say “The problem with ‘freemium’ is the journey leads you to the same market as everyone else” because it sounds like you’re saying that the market is too saturated and that you have to occupy the very top rung to make any money. That’s not true anymore. I know people who are in bands that have a just a few hundred followers, but they make money because they’re damn good marketers. We’re in the era of making merchandise for your fans now. The major label era was about going out and finding lukewarm fans to promote as much shit to in hopes of attracting a large enough percentage to sell to, to make ROI. Businesses fail because of rotten business people. Bands fail because of rotten music people who don’t know how to market themselves. There’s room for everyone.

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