Trent Reznor has released 404gb of raw, unedited HD tour footage from three shows on Nine Inch Nails‘ 2008 Lights In The Sky tour. The footage is available as a peer-to-peer BitTorrent file.
An interesting pattern emerges about the reasons for Reznor’s BitTorrent tactics and Christmas gifts to fans. Several weeks ago Reznor indicated to fans that an official DVD project for the tour had fallen through after a negotiation breakdown with a production company. Whilst researching this 2008 conference paper and presentation I found out that Reznor knew in December 2006 about the Pirate Bay leak of NIN’s unreleased Closure DVD (Halo 12), a project still held up by licensing negotiations.
As I suggested in the paper, Reznor is using BitTorrent hyperdistribution to side-step negotiation breakdowns. You can visualise the backward induction of decision tree payoffs or the real options analysis. It’s a win-win situation for Reznor and NIN’s fans: Reznor breaks the deadlock and releases ‘unreleasable’ projects which probably have significant, unrecoverable sunk costs. Fans get the raw, unedited material for user-generated content. Behind this strategic rationale is a positive feedback loop that keeps NIN and Reznor relevant, generates buzz marketing and media coverage, and enhances Reznor’s bargaining power in negotiations. The losers in this reshaped value net are the traditional record companies, their retail distributors and music industry lawyers.
I recently blogged about a presentation the 2008 Communications Policy Research Forum in Sydney on disruptive innovation in the music industry.
You can now download an Adobe PDF version of the PowerPoint slides here.
The refereed paper has been published in the Proceedings of the Communications Policy Research Forum 2008 (pp. 155-175 or PDF file pp. 179-199). You can also download a local copy of the paper here.
The paper’s case study examines why Radiohead and Nine Inch Nails released their new albums as digital downloads. I suggest a major reason why, and one that was overlooked by Web 2.0 pundits, is that each artist was in the ‘label shopping phase’ of a new contract and defected after negotiation problems with their major labels. This fits a pattern in mergers and acquisitions: the major labels lost artists due to integration problems in a merger or acquisition. Terra Firma Capital Partners has since partially confirmed this hypothesis: the private equity firm endures more post-acquisition integration problems with EMI and is fighting against government regulation of Great Britain’s financial services sector.
The paper’s data appendices contrast the artists’ strategies with signficant events and innovations in music industry contracts, conglomerate mergers and deal structures. Somehow I missed U2‘s March 2008 deal with Live Nation: I found out about it in an October 2008 announcement. Guns n’ Roses also finally released Chinese Democracy (MySpace audio stream): a new album that has taken 15 years, a rumoured US$14 million budget and 14 recording studios in New York, Los Angeles, Las Vegas and London. I may write a paper on it . . .
I recently spoke at the 2008 Communications Policy Research Forum in Sydney on disruptive innovation in the music industry. My presentation looked at the reasons for why Radiohead and Nine Inch Nails pursued online release strategies for their respective albums In Rainbows (2007) and The Slip (2008), and evolved from some initial thoughts here. The reasons suggested in media coverage – Web 2.0 experiments, disruptive innovation and freeconomics – were ‘true yet partial’ explanations. They overlooked two significant facts: (1) both artists were in the ‘label shopping’ phase near the end of their contracts; and (2) both artists were frustrated with their respective labels EMI and UMG, who each triggered artist defections due to post-merger integration problems. The presentation also discusses the role of Disruptive Innovation Markets, the Disruptive Information Revelation principle, and lessons for journalists, new media theorists, policymakers and valuation analysts. Thanks to the Network Insight Institute team (Mark Armstrong, Cristina Abad and Mark Armstrong) and the two anonymous reviewers for their help.