When Wu-Tang Clan announced recently that they’d be pressing only one copy of their upcoming album The Wu – Once Upon A Time In Shaolin and would put it up for auction after a museum listening tour, the general thought of music industry insiders was that this was a giant publicity stunt. Well, stunt it is that’s working beautifully in raising the group’s visibility, but it’s also an excellent case study in one of the principles of the Economic of Free, a theory put forth a few years ago in Chris Anderson’s book called Free: The Future of a Radical Price. Whether they know it or not, Wu-Tang is proving that the little understood second principle of the concept works like a charm.
While Anderson doesn’t outline the concept of the Economics of Free (E of F) specifically like I’m going to in his article, breaking it down into the following two principles makes it easy to grasp and see in action. Let’s take a brief review in how E of F applies to music sales in the world we live in today.
The Two Kinds of Products
First understand that the typical artist has two kinds of products; infinite and scarce. Typical infinite products are music or videos in a digital form, which cost nothing to reproduce. Scarce products include tickets to live shows (not very scarce, but more so than digital music), custom CDs and CD box sets, signed merchandise, exclusive access to musicians, backstage passes, private concerts, and anything else that has a limited supply.
Giving Some Away
Keeping that in mind, Principle #1 is “Give some or all of your infinite products away for free in order to charge for the more scarce ones.” We see this all over the web every day in the form of the many “freemiums” that are offered. For instance, sign up for the free tier of Pandora or Spotify, and if you like it, you can buy up to the next level of service that makes it ad-free with better audio quality.
Instead of using money, many Principle #1 transactions revolve around social currency, like giving away a free download or exclusive content in exchange for an email address. That allows the record label, artist or band to continually offer other products that you might buy later that potentially carry a higher profit margin.
It’s How You Charge
Principle #2 is often less applied but it’s just as powerful as the first, and it’s the one used by Wu-Tang. We can break this principle down to “The more scarce a product is, the more you can charge for it.”
For Wu-Tang, there’s only a single copy of the album, so it becomes the pinnacle of valuable to the superfan. There have been reports of bids that go as high as $5 million dollars, and that’s even before the actual auction has begun!
Other artists provide scarce items that begin with signed memorabilia like pictures (still a favorite), drum heads and even guitars. Yet even more scarce and valuable are the items that center around an experience instead of a product, like backstage passes, entrance to a VIP room, dinner with the artist, or a visit to a rehearsal or the recording studio with the artist. An good example would be Britney Spears, who charges as much as $5,000 for a “Total Experience” VIP package to her current Caesar’s Palace Las Vegas show that includes a backstage tour, a meet and greet, a Britney goodie bag, and even a chance of an onstage appearance with her. The more scarce the item, the more you can charge.
It’s Been Done Before, Somewhat
For Wu-Tang, of course, the price for the product is only worth it as long as no material from the album leaks out onto the virtual market, as that would begin to diminish the value of the package. That said, this is just a variation of what many boutique record labels have done for years, where they issued 1000 copies of the album and sequentially numbered them. The uber-fan would pay for the bragging rights of having one as close to “1” as they could get, but just owning one of the limited number of copies could be considered a coup in fan circles as well. Wu-Tang has done this to the ultimate extreme in manufacturing just a single copy.
If you take a step back and look at the the release of the Wu’s album from a more macro perspective, this could actually be a strategy for the future of physical product in the music business. Considering how physical sales are rapidly diminishing, if you’re not going to sell that many copies anyway, why not just print a limited amount, number them to make each a collector’s item, and charge more as a result. You could even hold back a number of the lower numbered ones to sell at auction like Wu-Tang. Chances are, the same amount or more money could be made as the widespread release methods that labels use today, and it would energize the artist’s fan base in a way that an old-fashioned release seldom could. Maybe Wu-Tang Clan is really on to something.
