Techdirt’s Michael Masnick has put together a case study on Nine Inch Nails’ business model and gave an excellent presentation discussing his conclusions. Throughout the video he argues that the new music business model comes down to this formula:

Connect With Fans (CwF)
+ Reason To Buy (RtB)
= The Business Model ($$$$)

Masnick exemplifies Trent Reznor’s tactics in relation to his equation:

1) NIN ‘Connects with Fans’ (CwF):

• NIN dropped a USB stick with a new NIN song in the bathroom at a NIN show
• NIN highlighted letters on the back of a NIN shirt that led fans to the secret site (iamtryingtobelieve.com) where they could take part in an alternative reality game
• Reznor leaked their own music on BitTorrent sites
• NIN made their 2008 release The Slip available for free – the release coincided with an announcement for their upcoming tour
• Information visualizations were made available, mapping where NIN fans who downloaded The Slip were located
• The NIN site aggregates Flickr photos and YouTube videos tagged by fans
• The band released 400GB of live HD concert footage for fans via torrents
• NIN gave away free concert tickets in a cryptic treasure-hunt game, for example one fan found tickets in an Los Angles drainpipe

2) NIN Gives Fans ‘A Reason to Buy’ (RtB):

• The Year Zero album came with a color changing disc – something that can’t be replicated by an MP3
• Ghosts I-IV was a free download, but NIN also made available 2,500 copies of a $300 “Ultra-Deluxe Limited Edition Package” that included two CDs, a Blue-ray disc and other goodies all in a package signed by Reznor himself. The package was a huge success and all 2,500 sold-out within two days, amounting to $750,000 in sales.
• NIN has connected with their fans to such a degree that NIN fans respect Reznor and want to support his initiative. This can help explain how Ghosts I-IV brought in 1.6million in the first week and was Amazon’s best selling album of 2008.

It would be great to see more case studies like this being written about musicians that follow the CwF/RtB logic. Masnick believes this model can and is working for both large and small musicians – he doesn’t mention any of these findings, but additional case studies can be found on the Creative Commons website. In conclusion Masnick adds, “there is a lot more music to be made, a ton of new fans to make very, very happy — and, yes, through it all, an awful lot of money that can be made as well.”