The Nine Inch Nails Theory of Entrepreneurship

Published January 08, 2009 @ 11:47AM PT

Mashable has a great post today about how Nine Inch Nails continues to be on the cutting edge in the way it treats its fans in the new digital area. For those of you unfamiliar with the industrial rockers, Nine Inch Nails is one of the groups that in the last few years has experimented with alternative music pricing schemes.

In March, they skipped the major labels and self-released a 36-track instrumental album called "Ghosts I-IV" for free under a Creative Commons license. In addition to file sharing networks like BitTorrent, the MP3 album was also available for $5 on Amazon. Last week, Amazon announced that despite the fact that it was available for free elsewhere, Ghosts I-IV was their top-selling MP3 album of the year. And just yesterday, NIN frontman Trent Reznor announced on their official blog that some brigands had managed to capture more than 400 GB of illegal HD footage from the most recent NIN tour. Instead of threatening legal action, he posted a link to the site where fans could download it.

Reznor's conversion to a totally different model of music business was the product of his utter revulsion with the way the industry treated fans. Last year, he wrote on his blog:

As the climate grows more and more desperate for record labels, their answer to their mostly self-inflicted wounds seems to be to screw the consumer over even more. [An example] that quickly come[s] to mind:

* The ABSURD retail pricing of Year Zero (a NIN album) in Australia. Shame on you, UMG. Year Zero is selling for $34.99 Australian dollars ($29.10 US). No wonder people steal music. Avril Lavigne's record in the same store was $21.99 ($18.21 US). By the way, when I asked a label rep about this his response was: "It's because we know you have a real core audience that will pay whatever it costs when you put something out - you know, true fans. It's the pop stuff we have to discount to get people to buy."

So... I guess as a reward for being a "true fan" you get ripped off.

I think this warrants the coining of the "Nine Inch Nails Theory of Entrepreneurship":

Love your clients/customers/stakeholders
The first and most important lesson in the NIN Theory of Entrepreneurship is to love your clients, customers, or stakeholders. For NIN, this love means treating their most devoted fans with respect, trust and transparency when it comes to pricing. For other types of enterprise, this respect, trust and transparency will mean different things, but will be essential everywhere.

Find business models that accurately capture the value you're trying to create in ways that people respond to with joy
The value an organization or a business creates is not static. In the music world, the way value is priced (the cost of music) has stayed largely static, despite the costs involved in reproduction and distribution dropping to almost nothing. This has (clearly) produced a back lash. What NIN and others are experimenting with is new ways to capture value that feel legitimate. Fans are still happy to pay for concerts, live DVDs, and even the convenience of smartly-priced digital audio files. They don't like antagonism and exploitation.

Turn possible threats to opportunities to amplify brand love
Brands matter. People like doing things, buying things, and being a part of things that make them feel good and that make them feel connected. The NIN brand has become even more attractive to fans because of the way that Reznor treats them. The high quality live footage could be percieved as a financial threat to NIN (in that it has the potential to undercut sales of the next live DVD), but instead, Reznor's playful link to the footage and suggestion that a talented fan edit it just increases the pleasant emotional aftertaste of your NIN experience. He gets it, and I'll betcha the long-term financial payoff is significant.

So because we love NIN and better entrepreneurship, let's all enjoy a video of a live rehearsal of the song 1,000,000 from NIN's recent "The Slip."

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Comments (12)

With all the greed and ignorance in the world this is the stuff that gives you hope and keeps you going. >:-)

Posted by Kevin Gearhart on 01/08/2009 @ 02:54PM PT
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Nine Inch Nails has done the correct thing which was to challenge greedy record companies. This should be the new model for the music industry where artists and bands would sell music at reasonable prices on the internet and receive a lot of fan attention. With this model in place, the bad model the record companies have made would go into the past.

Posted by Edwin Bonilla on 01/08/2009 @ 04:09PM PT
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Right on. Go NIN! It is really good to see good-karma business practices --especially in the music scene. Hopefully it does catch on in other fields as well... : )

Posted by Alma landikusic on 01/08/2009 @ 04:30PM PT
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Keep in mind that NIN was pretty big before they broke with convention. There are smaller, newer bands trying to do this, so it will see how this evolves.

So, keeping with the NIN analogy, it would be really interesting to see big, established np orgs make some changes, like shaking up the conservative foundations structure.

Posted by Barbara Clarke on 01/08/2009 @ 06:54PM PT
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Barbara this is a good point - that NIN had a pre-established fan base and a pretty quality brand to begin with.

Another case in point though of someone who actually built their brand up by some of the same principles is Lil Wayne. Lil Wayne had some hits, but put out something like 5 mix-tapes of free material before dropping Tha Carter III, which was of course the highest selling CD of 2008.

Posted by Nathaniel Whittemore on 01/08/2009 @ 06:57PM PT
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Interesting and encouraging!

I wonder whether/how this theory will develop in other industries. E.g. Selling tuberculosis or HIV/AIDS drugs at a low price to people living in poverty in developing countries. There has been a huge argument about whether it's do-able.

Posted by Evelyn Garland on 01/08/2009 @ 09:20PM PT
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Barbara's point overlooks the fact that Nine Inch Nails is popular -despite- record label's best efforts, rather than because of. If you're familiar with the history of NIN, the guy behind the band has been railing against the recording industry ever since he got his first taste. You can get a better idea of what I'm talking about by reading some of the wikipedia entry on Nine Inch Nails. His first album (now multi-platinum) was called "an abortion" by his label before it was released, and got little to no promotion from said label. How's that for a start? Dude's been doing the under-the-radar self-promotion thing for a long time. The labels have really only come in after the fact to claim credit.

Posted by Matt Dunphy on 01/09/2009 @ 02:35PM PT
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Before this article I never knew a lot about NIN, although I must say I like the new business adventure they are demonstrating. I feel that maybe NIN understand that with all the downloading and technology in today's society it's going to be difficult to sell music anyhow. Somehow, someway NIN offered their music for free but it was the top selling MP3 album of the year. They found a way to still become successful without taking lots of money out of their fans pocket. I also feel by them doing this that they have created a relationship with their fans, and also may have gain new fans from the experiment.

Posted by Keron Pearson on 01/28/2009 @ 08:29AM PT
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Great post! I love the way you connected the dots with this write up. You've tied together music, the internet, entrepreneurship, and used the change.org portal of new ideas, causes and social innovation to communicate your point. Love it! Thanks for posting.

Posted by Rasul Sha'ir on 02/20/2009 @ 03:20AM PT
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Musicians are entrepreneurs, there is no doubt about it. We are seeing the rise of entrepreneurial artists, filling niche markets with substantial value.

There are two points that we should add about musicans as entrepreneurs.

1. Any successful musician / entrepreneur must build a strong team, call it a band or company.

2. The barriers to starting a successful, self-sustaining band are dropping (check out www.lowanthem.com) with new tools, record labels, and business models. Like an entrepreneur, who you know matters less and less than who you get to know. At the same time, the need to differentiate is increasing (see point 1)

PS NIN R0X

Posted by Charles Harding on 03/16/2009 @ 12:06PM PT
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I'm a huge NIN's fan as they remind me of my teen years. I think Trent Rezner connects with his fans as a likeminded individual rather than a rocker who wants to simply entertain and so new markets are open to him. I'm not sure this model would work across all genre's but I'd love to see it.

Another example of a recording artist stepping outside the lines of record labels is Canadian artist Jane Sibbery AKA Issa who has rallied against record companies since her beginnings and has implemented a self determined pricing system on her website. I remember being on it and they listed the stats of purchases in the left hand corner. Ironically, most purchasers of the downloadable mp3's paid more than the recommended rate of $.99 per song and only a few didn't pay anything at all.

Posted by Michele Rodriguez on 03/22/2009 @ 01:20AM PT
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As I was reading the article, I was inspired....inspired to think about how a new entrepreneurial spirit could be applied to more than the music industry. How could transparency and knowledge sharing (see Creative Commons) apply to other industries such as medicine? Could we create a breakthrough from our current breakdown in medical care, with insurance companies and how they regulate the care -- or not -- you receive? Something to ponder on....

Posted by Jodi Syverson on 04/24/2009 @ 01:00PM PT
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Author

Nathaniel is the founding Director of the Center for Global Engagement at Northwestern University, which works annually with hundreds of students in dozens of countries around the world through curricular programs and student project incubation.