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An Argument Against “Pay What You Want” Pricing

Lady Gaga shot to the top of the sales charts upon the release of her last album, in part because it was deeply discounted on Amazon. Radiohead pioneered the “pay what you want” approach, with most downloaders opting to pay nothing at all. Last week I asked my fans which pricing model they prefer, and received dozens of enlightening and thoughtful answers. The discussion continues, but as you’ve already deduced from the title of this article, I’ve made my decision.

I tried both approaches over the past two months, with two full-length rarities sets. Both consist of material already released on USB key, so the audience is relatively limited. I sold the first set for $5 with a discount code, and made the second set name-your-price. The latter features more recent recordings, and is clearly the superior release, so there’s little point in comparing sales numbers directly.

Name-your-price certainly has a lot going for it:

  • It provides a legal alternative to piracy
  • It generates far more downloads, which can boost your mailing list if you require an email address
  • Anyone can “own” your album, even in countries with weak economies or rampant piracy (a decent percentage of my downloads were from Russia)
  • People are more likely to share a link to a “free” download with their friends
  • Potential fans can download first, and decide if they like it later

But in my opinion, those pros don’t offset the cons:

  • “You get what you pay for” is a deeply embedded mental shortcut that holds true in most cases. By that maxim, free music is worthless. Yet when we pay for something, we’ve already at some level decided we’re going to like it. Which perception do you want to reinforce?
  • It means less money per download. A lot less. I averaged $2, with 70% of downloaders opting to pay nothing.
  • It forces every fan to tell you what your music is worth to them.

That last one is a dealbreaker for me. Each of my fans knows that when they enter a dollar amount, I’m going to see it. Some even follow up with an email to explain their thought process. This creates a lot of unnecessary friction. While it may compel some to opt for a higher price, the decision can be paralyzing, as Color Theory fan Simon Lewis describes in the comments:

I spent too long pondering how much to pay that I missed my chance. I don’t want to rip off the artists (especially ones I care about) but I also want to get stuff cheap (who doesn’t love a bargain?). Then I listened to the ep several times because I could and, although I really liked it, felt I didn’t need to download it yet. I would opt for having just samples up there to tempt me into buying it all. I should have just bought it for the price you put on the first one (but is that enough?).

Even if you set a minimum price, the option to pay more can be a stumbling block. Of course, those who don’t care what you think will enter the minimum and download away, but are those the fans you want to cultivate?

Here’s my 3-step plan for next time:

Keep in mind that I don’t have the time or resources to create an elaborate collector’s edition or ancillary merchandise, so a tiered approach isn’t an option. Nor do I perform. All I have to offer is the music itself.

  1. Three weeks before the release date, I’ll give away a free song in exchange for an email address (via my Bandcamp site).
  2. Two weeks before the release date, I’ll start taking pre-orders at $5. I’ll post a single 2-3 minute audio teaser with 30 seconds each of 4-6 songs.
  3. On the release date, the price will go up to $10 and the entire album will be streamable.

What do you think? Will this provide the best experience for the fans?

55 thoughts on “An Argument Against “Pay What You Want” Pricing”

  1. I think Name-your-price is good way for distribution music around the world especially in countries of former Soviet Union(only right way). The price is not graduation of love fans to the artist or band and this way has good psychological roots nemad freedom for example. It's a way of choice.

  2. Interesting thank you Brian! For Josie's music we've found Bandcamp's minimum pricing very successful. What I like about it is that at 35p it's low enough to encourage anyone who might routinely go for illegal and free download to be supportive, while storing their email address into Bandcamp for her. But for fans who want to be even more supportive, as most seem to be, then this allows them to be too.

    There are two reasons we set the price at 35p. One is to cover license costs (for the three covers) along with the Paypal fees. The other is that Bandcamp reports sales to Neilsen of downloads valued at over US$0.50. So that seemed like a sensible minimum.

    The other interesting factor is that Josie's subsequent mailers to former Bandcamp customers have been extremely well recieved – something that just isn't possible with iTunes/Amazon etc.

  3. It is obviously broke and needs fixing… but someone has to pay and it looks like it will be the artists. I'm afraid these new developments will prevent talented musicians from paying the money to promote their beautiful work so that the likes of me will find it. The 3 step plan proposed seems reasonable for the consumer… but the artist seems to be making a bit of a sacrifice.

  4. I think most people would consider the minimum price to be "the price" and just pay that. I suppose it depends on how high the minimum is. Either way, it still creates unnecessary friction and another opportunity to back out of the transaction.

  5. This basically answers the major pricing questions I had regarding the debut EP for my new project. We'll give away 2 songs and do name your price for the companion remix LP. I might try to get fancy and program the site to allow name your price for non U.S. / western European IPs only.

  6. Good stuff Toby! That makes a lot of sense. Still, I'd rather collect those email addresses through free song downloads, without the barrier of a financial transaction (even if it's only 35p).

    For what it's worth, I've never had anyone name a price lower than $0.99, which easily covers mechanical royalties and PayPal fees, and meets the Nielsen threshold. Yet somehow I doubt I'll see my name in the charts anytime soon. ;)

  7. Very interesting article. Now I'm really going to have to get my recent interview with State Shirt up on my blog. He actually has a "steal this album" button on his site. In a nutshell: he makes money from licensing songs and doesn't worry how much people pay for downloads, or if.

  8. Forcing every fan to tell you what your music is worth to them, is a mind opening revelation, not to be dismissed as just uncomfortable. It might also help an artist learn how to make it MORE valuable to fans, after learning it's perceived value. I also think it's a great way to keep a constant pulse of your fans' true feelings. You could also give them one free song for being willing to give you that opinion. I think the opinions are totally important…. and lead the way to the truth… which is, people will buy, when the feel like they just gotta have it. Without that that feeling… sales are way less viral.

    But your last question…"Will this provide the best experience for the fans?" is not a question that actually has anything to do with your fans' experience. You're looking for a way, new ways to make money. Appealing honestly to them might work better than veiling your true intentions with a sentence about "fan experience."

    I WANT for you to make money with your music, LOTS of money. But I think we have gone past the era when selling music… is seen as valuable enough to pay for. I just can't be bothered with the argument that I WISH, music was something that never became free. It did, and now we live on a different planet.

    The best I can suggest… is to look at your music as somewhat of a loss leader, something that pulls more traffic to your website so that you can sell other products that can create income for you. Maybe you could put a compilation record together of you and your favorite other artists. Maybe you could focus on selling one single at a time, and have a big campaign for every song, instead of an entire CD.

    One thing I do know, is that when people think your music is AWESOME… when it rises to the level of ESSENTIAL, they'll pay for it, providing you get the music to be playing in front of enough ears.

    People will also buy your music if it's the ONLY awesome thing for sale where there is a lot of traffic already, and people already have their wallets out.

    People will also buy your music, if you are the new HOT thing. Which is entirely possible….

    I wish you the best man, I just thought I'd throw my 2c in. Hope you're well.

    Steve Soucy

  9. Thanks for sharing your insights Steve! Making music that rises to the level of essential is our core mission as musicians. In that, I agree completely.

    What I don't agree with is the suggestion that I don't care about my fan's experience. My chief objection to "pay what you want" is that it forces people to make an uncomfortable decision. I'd like to release my music in a way that generates excitement, provides a bit of mystery, and reduces friction. Sure, I'm in the business of selling music, but that doesn't mean I only care about the bottom line.

    I appreciate the suggestions about other products to sell, but I'm not ready to declare my music a "loss leader" just yet. For now, it's all I've got.

  10. I SO understand! And my intention about providing the best experience for your fans… is that you do EXACTLY that. And that will ALWAYS include finding out what they think, even when it's uncomfortable.

    I don't have exact answers for you, but I've learned a few things about WHY people buy anything, that's been my daily study since I stopped trying to sell my own music.

    When the perceived value or demand for what you make is higher than what it's compared to, you can sell and charge more.

    If you're only creation is music, then it's just gotta be something that people talk about LOVING. Without that love thang on eleven, or tying your music to another product those same buyers are rabidly looking for, I don't see many people parting with cash.

    And I would LOVE to be wrong more often about that.

    The one strategy I have seen, is covering popular or old songs in REALLY creative ways.

    This original, http://www.youtube.com/watch?v=Uy7c6ghHAeY&ob=av3n sparked this cover…. http://www.youtube.com/watch?v=d9NF2edxy-M You probably already know the story…. But I think this is an excellent strategy to include, especially for creators like you who have LOTS of ways to be creative at your disposal. Creativity… RULES.

  11. Good stuff Steve! A unique cover can provide a great foot in the door with fans, Pomplamoose probably being the best example.

    My Depeche Mode tribute album definitely helped in that regard, but right now my fans want more original material. I know this because I asked! I put together some questions with SurveyMonkey a few months back and got loads of great info.

    I welcome every fan's opinion, but I'm not sure it's wise to interrupt a financial transaction to ask for it.

  12. Survey Monkey rules! Have you surveyed your fans to KNOW that they would rather buy 10 or 12 songs at a time, more than just 1? Or that including 1 inventive creative cover on EVERY CD would be a good idea? Just wondering out loud.

  13. Good question! I've done one cover on my last two CDs, but those tracks haven't received as much attention as the originals. As for singles versus albums, my fans made it resoundingly clear that they prefer to buy sets of songs (through their actions, not the survey).

    Whenever I survey my fans, I get a lot of "do what feels right" and "go with your gut" or "whatever you want" kind of responses. When in doubt, I opt for what would please me as a music fan.

  14. Thanks for this post. I'm with you, "pay what you want" creates too much friction. Also, for what it's worth, I don't buy Steve's notion that you learn a lot; he also seems to be equating the discomfort with you not with the fan. Personally, when I FINALLY get my album out there, I'm going to give it away for 30 days to members of my mailing list, offer them all a free bonus song if they will give me their opinion of the music, and charge them $5 for a real CD. After 30 days, the price of the CD will be $10 ( I think ) and a download will be $5 ( I think ).

  15. Sounds like a great plan Jeff! That's a solid way to reward your mailing list members. I'd ask that they give their opinion of your music in the form of a review on iTunes! Or if they don't like it, they can just email you directly. ;)

  16. The pre-order idea is interesting, but ultimately I think you will be cheating yourself out of money. People who are likely to preorder are already fans. They'll pay top-dollar. Why force them to pay less? My strategy at the moment is to release my most recent at a pay what you want no minimum ($0 requires an email though) through bandcamp plus sell through itunes, amazon, zune, etc for those who don't like paypal or prefer those platforms or are just browsing, and sell the rest of my catalog with a minimum above 0. New fans who have been made fans by my newest and best stuff will go back through my catalog and buy all of it many times.

  17. Its nice to reward your followers, but those mailing list people are fans that are more likely to pay more for your music. Why are you forcing them to pay less? Use free or cheap music to get NEW fans. Reward your followers with free music or interesting one-off things occasionally. You're cultivating this following so you can get their money!

  18. I understand where you're coming from, even though I see the money as secondary. The most dedicated fans will buy anything, at any price. At the same time, a limited time offer can motivate casual fans to pull the trigger. For me at least, I think the tradeoff is worth it. If 10% of the people on my mailing list bought an album, I'd consider that a win.

  19. Great interview! I like his music too. I'm pretty much coming from the same place when he says, "I don’t really know how many people steal it, but enough people pay for it to allow me to continue to be able to make music." The important thing is to not see every free download as a lost sale, because in most cases, it's not.

  20. Doesn’t having your music available through every digital distributor solve this problem? If they don’t like name your price, iTunes. If they want free but legal, Spotify/MOG. The 3 step plan sounds good to me.

  21. SGX It's my very first album and I just want to make sure I offer it for free to people who have sent me positive vibes. I can honestly say money is not a goal, but the next album…

  22. While I'm not sure I'd purposely "window" my release schedule, it can take months to show up on Spotify. The abundance of options is further reason to focus on your core fans' experience, since they are the ones most likely to buy direct.

  23. For artists and distributors who really want to crack the code, I suggest a radical spin on PWYW called FairPay that uses feedback to incentivize fair pricing.

    The problem with fairness for conventional PWYW is no consequences in single PWYW transactions, but by applying FairPay selectively over an ongoing relationship, there are consequences, and only those who do pay a fair price get to continue.

    As to your issues:

    ■“You get what you pay for” — FairPay turns it to "pay for value received (after you listen) or pay the full set price in the future".

    ■"It means less money per download." — that changes when you "nudge" prices based on ongoing dialog.

    ■"It forces every fan to tell you what your music is worth to them" — this is best done through a distribution service (that can pay a fair percentage to the artist and manage the process), so the artist does not see individual fan responses, but can see the anonymized statistics. That gives the artist new and direct guidance on how their audience receives them.

    Details on how FairPay applies to music are at http://www.fairpayzone.com/search?q=music.

  24. I look forward to seeing how FairPay plays out! It's certainly an interesting approach. I also wonder if we're going to start seeing Flattr buttons on music sites, if that service ever picks up steam.

  25. It's a tough call. ideally, music shouldn't be a commodity, but we live in a commodity culture unfortunately. It's pretty easy to see all sides to this issue. The truth is that your music is going to get shared on the internet for free anyway after you release it, so why not release it or at least some of it for free yourself and beat them to the punch. http://www.nairbomanblog.blogspot.com

  26. I'll definitely post a song for free beforehand, but actually, a lot of people genuinely want an opportunity to support the artist. It seems like whenever another musician posts a Kickstarter project, a fan posts the link on my wall and says, "When are YOU going to do something like this?"

  27. Brian Hazard Very true. I have posted almost half of my songs from my upcoming album on the 'net. I find this to be a good compromise between putting it all out there or only a little. Kickstarter and sites similar to it seem like a great idea.

  28. I've spoken out against fan funding (you'll find An Argument Against Fan Funding here on the site), but I've seen some friends do it "right," simply to enhance a project that they'll do anyway, and without all the begging.

  29. We in the end have to consider, that in making our CD as an Indie artist, we have immense costs and that in an economy crisis such as this it is already hard to even be a musician, since I can not go to a producer saying "Hey I pay you what I think you are worth". Once you are Lady Gaga it makes sense to do the "Pay What You Want" price since she makes all her money easily back thru merch and touring, also to be considered is, THEY (record labels, corporations) will always find a way to keep their big sheep (Rihanna, Lady Gaga and all majors) on top and keep the Indie struggling. I know of cases when someone got too popular, their Youtube account was suddenly deleted because they got too popular as an Indie….

  30. If you don't record and produce your own stuff, the cost can be overwhelming. Even then, most everyone has to at least shell out for mastering and graphic design. There's always the "record yourself playing acoustic on YouTube until you gain a following" route. ;)

  31. Brian Hazard you have to record with pro's if you want to go somewhere, I put 20,000 into my album and fans love it, but of course we as Indies have to work so much harder to get our stuff out there, it lacks on promo budgets…

  32. The reason I don't like the donation model is that most artists don't have the kind of PR as Radiohead, so it doesn't accomplish anything. Lots of artists give away their music for free but nobody wants it because nobody cares. It was only "shocking" at the time Radiohead did it because they're already a legacy artist. They got a ton of press from it that they otherwise probably would not have received. When an average band does it they won't get the same hype that Radiohead did.

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