NiN’s Donation Model Doesn’t Work for Most Artists

This year, several established bands have decided to give away their music for free, while giving fans the option to donate whatever they seem fit. For Radiohead and Nine Inch Nails it was a great success since they made more money from the donation model than they would have otherwise. However, it seems that this doesn't hold for less established artists.

After hearing the success stories of Radiohead and NiN, several people opined that this should be the future business model of the music industry. Give your music away for free, and fans will line up in the donation queue. This should work, right? NiN made $1.6 million in the first week their album was available for download, and Radiohead said it made more money online than with all of their other albums combined.

The big advantage NiN and Radiohead have, of course, is that they already have a huge fanbase. From a standing start it would be difficult for relatively unknown bands to give their music away, and it would be much harder to get people to donate. To see if this would indeed be the case, and to get an impression of how much revenue an artist can generate from the donation model, we decided to crunch the numbers from Jamendo.

Jamendo is one of the largest music sharing sites where users have the option to donate to artists they would like to support. Since the site launched in June 2005, close to half a million users have signed up. In three years, the site has turned into one of the largest music sharing communities. However, it seems like the donate buttons are gathering dust.

Before we go into detail, we want to make it clear that Jamendo is one of the best free music services on the Internet, as it brings together artists and fans. This post is not an attempt to write about how Jamendo failed, because the site is much more than a ‘download and donate’ platform. What we want to show, however, is that donation based music models are not money magnets for the average artist.

We decided to examine the total number of donations up until October 25, 2008, and the results are quite revealing. Of the 423968 users, 1650 have donated something, little under 0.5%. In total, these users were good for 2712 donations adding up to just over $36,000. This translates into an average of little over $10 per donation. The largest donation on Jamendo thus far was 200 Euros ($250), impressive, but not as impressive as the $5000 NiN’s Trent Reznor donated when he downloaded his ‘free copy’ of Radiohead’s album.

The top grossing artist on Jamendo is Rob Costlow, with just over $1000 in donations over three years. On Jamendo, his two albums were downloaded more than 50,000 times, and over half a million people have streamed his music on the site. Jamendo currently has close to 10,000 artists (not all of them accept donations), and 648 of those received at least one donation. To some this all sounds quite disappointing, but does this mean that artists shouldn’t use donation based services such as Jamendo?

The answer to this question is simple. If their goal is to make thousands of dollars from it, probably not. However, that is not what most artists intend to do. They want their music to be heard, create an audience and pick up some fans here and there. The people who download their music for free, and like it, are potentially the people who visit their gigs, buy merchandising, and tell their friends about this great band they discovered. Lesser known artists will never be able to generate a decent income from donations, but making their music available for free sure is part of a viable business model.

Update: In the title of the article we used “NiN’s Donation Model”, this is not completely accurate. Radiohead had more of a donation model than NiN.

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