Playing a game of Audiosurf a few weeks ago, I investigated the music on Audiosurf Radio to see what tracks they had playing this week. It was a band that I, until that point, had never heard of before: Brad Sucks. Somewhat self-deprecating, but the style of rock Brad produced seemed interesting to me, so after my brief time playing, I wandered to Google to try to find the group. I quickly found their web site.
Like so many other independent musical artists, Brad sold his music as a download from his web site. What was slightly more unusual is that he was, theoretically, selling it for $0.00. Sure, you could pay, but there was no strict economic incentive to do so; you'd get exactly the same thing entering 0 in the name your own price box as you would entering 5.00, as I did- twice, because I bought two albums.
Game theory would suggest that there is no reason anybody would pay anything for the music. It is strictly disadvantageous to the purchaser to do so. Yet this business model is becoming more and more popular among musicians: Radiohead, Nine Inch Nails, and Jim's Big Ego, to name three, have all released an album with such a choose-your-own-price option recently. All of them have had "free" as one of the price choices. This is either a passing gimmick or a successful sales model, as all of the artists involved have declared their intention to repeat this practice; the net effect is to improve sales. At first glance, this seems bizarre; why should a legitimate, free channel for getting the music at extremely high audio quality serve to improve profit?
A naive explanation could be based on the advertising power of such a distribution. This was a strong factor for Radiohead and Nine Inch Nails, each of whom made the front page of Slashdot as a result, but Jim's Big Ego and Brad Sucks had no such advantage.
It seems more consistent with perfect market segmentation: every potential customer pays the maximum price he or she is willing to pay, and no customer is turned away by the price. An economist ignoring the emotional aspects behind a music purchase would be befuddled by this; people are voluntarily choosing to pay more than the minimum required of them to obtain a resource.
There is, however, an implied social contract in the tip jar next to these downloads. It poses a question to the purchaser: "What do you believe is a fair value for this music?" Would-be purchasers are then free to answer that question themselves, and then follow through with paying exactly that amount. Customers are not paying their maximum price; instead, they pay their ideal price.
It also makes the music much more accessible to new customers. People who have never heard of this musical group before have the option to pay nothing, or only a token fee, to hear the music, and then come back later and pay what they, in retrospect, consider the value to be. People who never would have paid for the music until they heard it get a chance to hear it anyway, introducing the performance to a wider audience.
Fascinatingly, these albums are not much less prevalent on file-sharing networks than other albums with similar rates of distribution, despite the presence of a legal source from which the music can be obtained for free. Perhaps these file-sharers who remain truly are the "customers" who would never pay the artist for a song, no matter what, and the RIAA can stop worrying about them because they'll never give them any money; and yet they are ashamed about this, too embarassed to go directly to the artist and intentionally enter a statement that they think their work is worth nothing.
Are these people cowards, or altruists? Are they resistant to directly tell the musician that they do not want to pay, or do they merely wish to save the artist bandwidth costs?
It's undoubtably a mix of both, but I can't help but wonder what the proportions are.