Is it better to let the buyer set the price for your music? This is the question on the minds of many artists in the 21st century.
Although it seems counterintuitive, by giving the fans a choice, some musicians have reported actually making more money from sales. But how is this possible?
To better understand what goes on inside a music fan's head during a pay-what-you-want (PWYW) transaction, a team of researchers from the University of Bonn, Germany, set out to investigate this topic on both a behavioral and neurological level.
The experiment went like this: in two trials containing the same people, 25 test subjects listened to music clips from a selection of albums and were then asked how much they were willing to pay for each album. Each subject's brain was monitored during the procedure in order to see the brain activity during each buying decision.
The first trial acted as the control. In it the participants were told that each album had a predetermined, fixed price, somewhere between 0€ and 10€ and that they would only receive the album if they bid an amount equal to or higher than the fixed price but would only have to pay the fixed price if the bid was higher. In the second trial the subjects were told that they could pay whatever amount they would like, including nothing, and still receive the album, but whatever they chose to pay they would have to pay.
Is street performing the most effective method for musicians to make money? (Photo by David M)
The neurological results found that, in the fixed price trial, the more a person enjoyed the music, the more likely they were to buy it. No correlation was found between brain activity and the PWYW trial.
As for the behavioral results, although the participants bid higher on the music with a fixed price than PWYW, they were still willing to pay reasonable amounts for the PWYW music despite being able to receive it for free. Perhaps the most interesting finding from this study is that participants were more likely to refuse placing a bid altogether in the PWYW trial, despite being able to get the album free of charge.
This brings up the question: why would you turn down something that you could get for free? And why would you pay for something that you could get for free?
The researchers suggest that social pressures and social norms influence buying decisions in PWYW situations more so than in fixed price ones. A potential buyer might feel guilty undercutting the worth of an album, or taking that album for free, especially if they believe that the creator of it has placed any sort of personal value onto the album itself.
From a fan's perspective, a PWYW system feels more personal and can give the fan a sense of closeness to the musician themselves. The feeling is more akin to supporting the music they love rather than a cold business transaction.
However, the amount bid on the PWYW music was still less that that of the fixed price. So why would an artist decide to sell their music in a PWYW fashion?
In a TED Talk, Amanda Palmer discusses the power of PWYW. She says that asking her fans for money and help brings about a far more positive and genuine connection than dictating to them. PWYW can potentially increase total revenue for an artist, as well. In a Techdirt interview, Jason Parker stated that, after setting the price of one of his albums on Bandcamp from $5 to PWYW, he saw a huge increase in downloads. The Seattle jazz musician went from making around $15 a month to $300 a month.
There is still much to learn about the psychology of voluntary payments for music, and although no correlation was found between the brain activity and pay what you want, the study leaves much room for further investigation.