Jun 082011

Rolling Stone magazine, after giving Lady Gaga crap for selling 440,000 of her 1.1million CDs last week through Amazon.com at a slashed price of $0.99 (for the whole record, not a single), are now giving her crap for only selling 74,000 this week (all at $10–$18 per disc, I assume). And it’s STILL #1.

I also think it’s cheating. So is a “free download” with your concert ticket (a-hem..Bon Jovi, Prince) or a CD included in the local newspaper (guilty again, Prince), although the claim on all three is that they charged the full rate on their end and there is no law against a loss-leader at the retail level.

So Gaga sells Born This Way to Amazon for $9.00 and Amazon instead of selling it for $11.99 sells it for $0.99. $8.01 loss per downloaded record x 440,000 = $3.5 million dollars. That’s a big single-day loss!

OK, Maybe they got the “Gaga Special” and paid only $6 per download – $0.99 = $5.01 x 440,000 = $2.2 million dollars. Still a big loss. Can’t see that being the whole story.

I smell a rat.

How long before a major artist does a FREE release of their new record but includes a paid sponsor to cover their profits? Would AT&T pay $10 million to The Rolling Stones in order for them to offer their new record download for nothing? If so, could they release it only as a digital release, have no promotion, no publicity, no marketing, no videos (save an exclusive interview and streaming concert on the AT&T website), and have the #1 record and far more money then they could ever get from a CD in the current music market? (With the standard business model, they would have to sell 20-30 million to make $10 million, truthfully much more than that.)

#4 with 71,000 sold is Eddie Vedder‘s Ukulele record. The label makes $350,000 and Ed, if he has a sweetheart deal make get $80–100K. Think the Hawaiian Tourism Group has some cash to sponsor the follow-up?

Sponsoring concert tours used to be selling out, then doing commercials was selling out. For $2 million in cash you better believe that Zaxby’sPresents Jungleland2’s Greatest Hits will be available from a fast food website near you!


  21 Responses to “Lady Gaga and Amazon.com…do the math”

  1. misterioso

    Man, you wouldn’t catch Seger pulling any of this crap.

  2. bostonhistorian

    Who gives a shit what Rolling Stone thinks?

  3. cherguevara

    Gaga’s manager wrote that they did not know about the Amazon deal in advance, meaning it was likely Amazon making a move against iTunes. FWIW.

  4. Any system that keeps music cheap to the consumers and still makes money for the artists is OK by me.

  5. I don’t buy it. How could they do something this big and not alert the artist’s label? it just does not make sense that they were not in on it

  6. Everything in the business and marketing world these days is such a circle jerk to impress investors that this doesn’t surprise me. Single-sponsor publications, in which pharmaceutical company sponsors a journal that happens to have content centered around that company’s products’ indications, for instance, have been going on for a long time in the publishing world. I’m surprised that it’s taken the record industry this long to come up with similar means of keeping all interested parties satisfied.

    Speaking of satisfaction, Lady Gaga should be thankful she’s not turning tricks behind a decrepit taproom.

  7. trigmogigmo

    Yeah, I tend to think this was Amazon simply marketing/purchasing a lot of traffic to its brand new music locker service, to get exposure and buzz for it. Loss leader to bring the virtual feet in the door.

  8. Amazon is constantly discounting albums to drive traffic away from iTunes, which is fine by me. Lady Gaga was their loss leader — just like NBC way overbids for the Olympics as a loss leader to push their shows.

    The stakes are going to get higher as Apple launches their cloud player to compete with Amazon. When you have hundreds or thousands of tunes in either Apple or Amazon’s cloud, they’ve got you for the duration.

  9. bostonhistorian

    Until Apple and Amazon start selling lossless music, I’m not buying anything.

  10. hrrundivbakshi

    Vedder’s uke record is #4 on what “chart”? Amazon sales rankings, Billboard, what? If all it takes is 70,000 copies sold to get to #4, the world has shifted under my feet and I didn’t even notice. That’s what happens when 90% of all your new music comes from junk stores and garbage cans.

  11. misterioso

    Psst…the world has shifted under your feet and you didn’t even notice. Just so you know. Doesn’t mean you have to care, though; that’s the beauty part.

  12. Unrelated: Check out Google’s home page today and make sure you’re on a computer with working speakers/headphones.

  13. Agree completely. Lady Gaga music is just “content”, owning the consumer’s entire delivery system and demographic and purchasing history is where the money’s at.

    I recently bought my wife some dance songs (incl Lady Gaga’s “Bad Romance”, $0.99 better spent than on the whole of Born This Way as far as I’ve heard) with an Amazon gift card and stored them in the cloud player. They went to our single computer iTunes and the 1 iPod correctly so I can’t tell if this cloud thing has any real benefits except as backup.

  14. cherguevara

    Gaga’s manager was responding to a rant by Bob Lefsetz, who writes a blog/letter that is often indulgent and annoying but it’s worth sifting through for the occasional gem. Here is a link to a page with his rant about Gaga and Amazon, which is followed by the response from Gaga’s manager.


  15. Wrong day to have too much work on my plate!


  16. Some weeks, it doesn’t take much hit number one on Billboard. The Decemberists hit #1 in January with
    93,567 sold — and $3.99 discount on Amazon.

  17. One of the benefits is you can access your “cloud” from any computer or certain smart phones, so you don’t have to have all the music stored on your own hard drive — or even an iPod or mp3 player.

    Especially with FLAC and bigger “lossless” files coming, it may be good — or it could all go the way of DVD-Audio, too.

  18. BigSteve

    It’s not apparent on the page, but apparently it’s because today is Les Paul’s birthday.

  19. So his claim is that this should have been a much bigger program (and complete music industry game changer) had Amazon promoted this correctly and had avoided the technical foul-ups.

    I see his point. I was not thinking about the destroy the industry to save the industry option.

    Isn’t the $15 ticket on a product that is shown to be valued far less by the general public the whole problem (and I mean lossy mp3s, not the CD itself)

    In a way the labels must hope the CD dies since they can afford to change the pricing on downloads easier than on physical CDs

  20. ..and Groupon could not have done this, since they do not have the ability to distribute the digital tracks w/o a digital partner.

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