“Practically everything web technology touches starts down the path to gratis,” explains Chris Anderson, editor-in-chief of Wired Magazine and author of an upcoming book detailing why free is the future of business. He notes that when a tangible product can be effectively distributed as an intangible product, we consume it differently. Production costs become less, delivery and storage fees dwindle, and eventually so does market value. Many products once sold for a profit are now free in their digital incarnations: stock quotes, maps, encyclopedias, etc. This trend has already transformed myriad industries, and made others completely obsolete.

Google has anticipated this continuing price depreciation by offering most of their online applications at no cost to consumers. Before Gmail launched in 2004, offering one gigabyte of email storage, competitors like Yahoo offered only four megabytes (256 times less). Three years later, Yahoo has followed the trend and offers “unlimited” email storage. Those who can recognize consumer trends early have the most to benefit. This strategy has been a key factor in establishing Google’s dominance in various online markets. Google uses free products to reach a wider audience, and then leverages this ubiquity to sell advertising space and alternative products.

As the price consumers are willing to pay for CDs drops, musicians should anticipate this trend in the music industry and use their recorded music to reach wider audiences.

Wired has set up a 10 round “smackdown” between Trent Reznor and Radiohead. Reznor seems to be cleaning up the most votes from fans. One of his more notable accomplishments, “Reznor advised Australian fans to steal his music after Universal priced it at AU$30.” As of my writing this post, the only category Radiohead has won is the “timing” category for the accomplishment of releasing their album first and “turning the music biz on its ear with the Oct. 10, 2007, In Rainbows release.”

Check out the fight and vote at Wired Magazine’s website.

Today musicNeutral attended Lawrence Lessig’s talk about his new project “Change Congress.”

Lessig, who founded Creative Commons in 2001, gave his last free culture speech back in January and has since then refocused his efforts on fighting corruption in Washington. Using examples and a fast-paced powerpoint-ish presentation, Lessig pointed to obvious problems that Washington has “failed” in solving: the Iraq War, global warming, copyright etc. Lessig states a “dependency on money” as the reason for these insufficient solutions. He believes politicians are sacrificing trust and quality for money.

Change Congress is seeking commitment directly from the candidates and legislators. Once taking the pledge, these politicians can embed a small “widget” on their official website making it known that they comply with Change Congress’s rules for transparency. This is similar to the approach used by Creative Commons because it’s a proactive method of getting the decision makers directly involved.

In much the same way Lessig’s Creative Commons licenses have reworked copyright law to permit the sharing of information, hopefully Change Congress can remove Washington’s dependency on corrupt money in an effort to create a higher level of trust and quality in our government.

The site is still in beta, but more info can be found here: www.change-congress.com

Marketing genius Seth Godin had a talk with some music industry folks a few weeks ago.

He has a great analogy of free music as “dating”.

Basically, let the fans listen to your music. See how this first encounter feels (just like “dating”). If it all goes well, then go on another date. Hopefully after enough listening, if it works out then you’ll fall in love. He sums it up with this point, “I have every record Ricky Lee Jones has ever made including the bootlegs that she sells. Rick Lee Jones should know who I am!” The idea is that when people fall in love they will spend lots of money to nurture that relationship, but you can’t just walk up to a random person on the street and propose marriage! You have to date first.

More insight and the full transcript is on the Seth Godin Blog.

People used to say that it didn’t matter if you were the greatest band in the world because no one would ever care unless you got played on the radio.

Today there is infinite airtime available on the internet and the game has changed. Musicians are competing for the consumer’s attention and the best chance a band has of recruiting new fans is to let everyone have the album for free. If your band is worth something to those people, then maybe they’ll tune in again (and maybe next time they’ll buy something).

Eventually - at least to a handful of people - you may be the greatest band in the world!

Nine Inch Nails’s Ghosts I-IV earned 1.6 million in it’s first week.

Trent Reznor reported that the earnings came from 781,917 downloads - including both the free and paid transactions. If Trent had went the traditional route of distributing this album through a record label the album would have cost fans closer to $15 each, while he would have earned less than $1.00 on each unit sold. Here’s a comparison:

Through A Record Company
$15.00 album X 10% in artist royalties = $1.00 per unit sold

Self distribution
$5.00 album X 100% in artist royalties = $5.00 per unit sold

In this case, the self distribution model is better for the fans and the musicians - it only leaves out the labels. It’s uncertain whether Reznor is a music industry anarchist or just a clever entrepreneur, but what is clear is that he is no longer collecting paychecks. Reznor owns a business and not a job.

The Charlatans UK released their tenth studio album You Cross My Path as a free download from the English based radio station XFM’s website.

Frontman Tim Burgess explains “We always knew this album was gonna be given away for free, even before we started writing so we wanted to make it the best album we’ve ever made. This isn’t a case of left over tracks and b-sides, we wanted to give our fans a quality record.”

The physical release date originally scheduled to be released this month has been pushed back to June 3, 2008.

Yesterday Nine Inch Nails released their latest album “Ghosts I-IV” under a Creative Commons license. The album is 100% DRM-free, available in a wide range of formats (Apple Lossless, MP3, CD, Vinyl, DVD, Book) and can be instantly downloaded from www.ghosts.nin.com for a suggested $5 donation (meanwhile, the first nine tracks are available for free download from the website).

I believe that releasing music under a CC License will be a growing trend in the next year. The benefits of accumulating a larger fan base far outweighs any miniscule album sale profits.

By forfeiting the exclusive ‘right to copy’, NIN is allowing this new album to penetrate the market faster, and on a larger scale. Under Creative Commons he still has the right to profit from selling physical copies of his work, he will still be credited for his work, and still be paid if his music is used for commercial purposes. Again, the main difference is that people on the internet can share his music without breaking the law (aka. getting RIAA-ed)

As an added benefit, being an early adopter for a Creative Commons License is worth millions in marketing for NIN: it’s currently the #1 most dugg story; and likely to be mentioned by every other blogger citing the end of the music industry.