Free is great. But what is better than free?

Kevin Kelly writes in a great blog (Better than free) that the internet is essentially one big copying machine. Furthermore, as the internet allows the infinite free flow of these copies, they become (financially) worthless. A pretty good summary of the fundamental problem facing the recorded music business I think.

According to KK, it is the things that can't be copied that become scarce and valuable. I won't explain the detail here, but these "things" (he calls them generatives) can be summarised as: immediacy; personalisation; interpretation; authenticity; accesibility; embodiment; patronage; and findability. It is within these qualities that the future business model for recorded music must reside.

The release last week of Depeche Mode's new album Sounds of the Universe is a great example of how this kind of thinking can protect (grow?!) revenues in this new world. Crucially this approach rewards producers by creating a better experience for the consumer - surely the goal for all marketing / product design.

As well as the now typical offering of standard CD or special edition CD+DVD options, the new release formats also included a limited edition box set and more innovatively an "iTunes pass" mechanic in the states (the first time this has been offered against a music artist).

After paying a one-off $19 (c. £13) the iTunes pass enabled fans to access a continuous stream of exclusive content prior to the official launch date. All of this exclusive content was downloaded directly into pass-holders' iTunes libraries as soon as it became available. This one mechanic delivers immediacy, authenticity, accessibility and patronage and is can therefore be viewed as a compelling alternative to pirated content. It will be interesting to see if this mechanic is continued on an artist by artist basis or whether this is a pre-cursor to a new subscriptions based model for iTunes (as opposed to current a la carte model).

Turning to the box set, the sheer scale of the offering is a perfect example of embodiment - the polar opposite to a formless digital download. Authenticity is literally achieved through the inclusion of a numbered certificate in the box (this definitely one for fans!).

This is all great in theory but what were the results? Although week 1 sales for this album were down 6% compared to their last release (2005's Playing the Angel) some rudimentary calculations show that although average CD prices have also fallen over the period (I have assume from £10 to £8 for ease) that total week 1 revenues are broadly on a par. Not a bad result considering an overall decline in the album market of some 30% (volume) over this period.

Although the super premium box set is of course not an option for all artists, I think the ideas above are a good illustration of where you can get to when you start to think about how you can compete with free rather than simply try to shut free down.