As some of you have read from the news, a couple of days ago Trent Reznor of Nine Inch Nails released their new album for free on the net. The first part of the four part Ghost I-IV was uploaded to the Pirate Bay and is also available from its website.

Two days after the release, Ars Technica reported that the $300 limited edition, which was available on the site had sold out, meaning that NiN had made at least $750,000. In initial reporting many likened NiN’s approach to that of Radiohead’s In Rainbows, but as Ars points out, the strategy was different in many important ways.

First of all, Reznor uploaded the first part as a torrent, but even so, the album’s website was pretty soon on its knees – a reality check on the true adoption rate of bittorrent or web design/e-commerece mistake, as the free download section didn’t mention the torrent-option at all?

Secondly, and more interestingly, the whole album was released with a Creative Commons license and in the text-file accompanying the Ghost I goes so far as to say this:

We encourage you to share the music of Ghosts I with your friends, post it on your website, play it on your podcast, use it for video projects, etc.

This was missed by many news outlets, like New York Times and even The Register, which went as so far as to call people who uploaded the rest of the album to Pirate Bay as freetards and that they were robbing Reznor off “a cool $2m”. Sure, $2 million in that same opportunity cost money that copyright lobby is always talking about when talking about piracy. Unfortunately, opportunity cost is not real money.

Undoubtedly you’ll be able to find the complete collection on the same torrent network you found this file, but if you’re interested in the release, we encourage you to check it out at ghosts.nin.com, where the complete Ghosts I-IV is available directly from us in a variety of DRM-free digital formats, including FLAC lossless, for only $5.

FLAC? Blu-Ray? Creative Commons? Bittorrent? 320kbps MP3s that beat Radiohead’s 160kbps MP3s to the ground? It sounds like this band knows a thing or two about the interwebs.

So, this guys know what’s high-tech, but that’s not the end of the story. Now, limiting all the fun only to the first part would be traditional. Sharp-eyed fans were quick to note another thing on the website:

Ghosts I-IV is licensed under a Creative Commons Attribution Non-Commercial Share Alike license.

So, even though NiN didn’t make a big fuss about it, uploading and sharing the rest of the work was OK by them. Well, it was inevitable that the full album would hit the nets anyway. NiN simply encouraged their fans to get it from their website, apparently with good results. Paradoxically this approach means that each fan who gets the Ghosts I-IV from NiN’s website will make them at least $5 – while in Radiohead’s version, even then fan-income is not guaranteed, because the free version is always available (legally or not). So, the paradox becomes that by setting a fixed price they might end up better off.

It was really interesting (especially as a decision analyst) that fans were given five price-points, $0, $5, $10, $75 and $300 – each offering more value. In my opinion, this shows a good model for future internet distribution – differentiate between listeners and fans. This shift of focus from unrealized sales to realized value added sales was the innovation in this approach.

Unfortunately, it seems that this whole internet approach seems to work only for major, already known, bands. Hopefully things like SXSW’s massive 4 gig torrent Vincent mentioned earlier are ways to get the internet working for the smaller bands too.

Radiohead’s experiment really pales in comparison NiN’s. In retrospect, who could justify paying more than what was necessary – in this case nothing – for the same product while knowing there were people doing exactly that. Plain simply it didn’t make sense to pay for something if you could get it free. Note that in Radiohead’s model, those who wanted a CD or special editions were told to wait and go to a store, whereas all version were available at launch at ghosts.nin.com.

Then again, what else would you expect from the man who promoted his previous album with hidden USB drives at concerts and made the soundtrack for Quake – the game that pioneered internet gaming? NiN seriously raised the bar for the next high-profile band attempting internet distribution.

PS. If someone missed out on the Radiohead’s free In Rainbows, tough luck. It’s not available for download for anymore for any amount of money.

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