Louis CK at the Beacon Theater

Would you ever think that a comedian could hold the key to unlocking the secret to making a lot of money online? Believe it, because that’s exactly what Louis CK did in early December.

But he didn’t just make a little money. He made a lot in a short period of time… $1 million dollars in eight days.

You’ve probably seen the story:

Comedian Louis CK has proved a point: People are willing to pay a reasonable amount of money for DRM-free content from a performer they love, even though it would be trivial for them to pirate the same content for free.

Twelve days ago, Louis CK decided to skip the distribution, DRM, ads and everything else that goes into marketing and sale of a video, and simply offer the video of his latest performance on his website for $5.

It took four days for Louis to earn $200,000, and another eight days to earn a whopping $1 million.

So how did he do it? And what can you learn from his approach?

The questions

One thing that I find interesting is the questions that Louie hoped his test would answer. It’s not so much the content of the questions, but that he asks them at all.

Let me explain.

Any good test is run to prove or disprove something. It’s called a theory and those theories are basically the questions you want the test to answer.

For example, here are the questions Louie was asking:

  • Would people buy at a drastically low price? – If you price something too low, people may not think it has value, so they ignore it. Five dollars is way less than the normal price for such a video ($20), so people wonder if it’s just copied material or just bad production.
  • Will everyone steal it? – Putting a video on your website leads to hackers stealing it and then torrenting it. Will this approach avoid that?
  • Will anyone even pay for it? – Because this was an experiment where the middle man was removed, Louis wondered if anyone would even think it worth paying for. Customers might be thinking Louis is no longer wanted by the big people, thus reducing the value of what he offers.
  • Will it be easy to buy and download? – Louis wanted to make the process as easy as possible…would all the time he spent on it make the difference?
  • How much can one person make off of an experiment like this? – At the base of this test was a desire/need to make money… so the question was how much could be made? And would it be worth repeating again?

I’ll answer those questions in a few minutes, so keep reading…

The Pre-Launch

The product that Louie eventually sold on his website was a video of never-before seen footage he recorded with six cameras during a live show at the Beacon Theater, an upscale venue in Manhattan.

The total cost to record the footage was $170,000. This doesn’t include Louie’s time, which he invested in by directing the show, then editing the footage for countless hours up to the launch.

Louie also invested $32,000 into the development of his website.

One thing that is immediately noticeable is that the “buy” button is at the top and obvious.

What else is there for you to do but “buy the thing?”

Testing is so important when it comes to making a website. I don’t know if Louie tested different wording like “Buy the video” or “Buy it now.” Once they felt the site was ready and the video was ready they launched.

But for you site it’s worth testing, as Optimizely did in a test they ran on their site and during Obama’s campaign which both proved the power of one word on conversions.

Launch

Louis and his team released the video on noon December 12th. They were selling it for $5, allowing people to pay for it through PayPal and download it immediately.

There were no restrictions, meaning people could do with it what they wanted. They could watch it anywhere in the world, copy it and share it without fear of getting in legal trouble…

Twelve hours later Louie reported that over 50,000 people had purchased the video.  If you do the math, you know that he made over $250,000, which is enough to cover his expenses.

Not bad for 12 hours of sales. But things got a whole lot better.

Four days later Louis had made over $500,000, pocketing $250,000 in profit. Then that number doubled in the next eight days, bringing Louie to the magic number: $1 million dollars.

Granted, Louie admits that this would’ve been a whole lot less if he had done it through a large company. But there would’ve been a whole host of restrictions placed on the material…and the direct connection with the audience would’ve been missing.

Post launch

In his latest blog posting, Louie talks about how much he’s enjoyed the success of the experiment and how much he’s really enjoyed seeing people get involved and interested in it.

He likes making the money, but what he really seems to enjoy is the interaction with his audience. This is not surprising for a comedian who generally depends on intimacy with the audience to make his or her show work.

The success has given Louis the idea to continue by selling just about anything on the site, including CDs, videos and tickets to shows. If it works for videos, what about other products? Smells like another test to me.

My guess is that he’ll also continue to tinker with the current site, improving the call to action.

This is not a new approach

In Rainbows. Album cover via Wikipedia

Louis CK may be the first comedian to use this approach, but he’s not the first person.

In 2007, the band Radiohead offered it’s album In Rainbows to fans for whatever they could afford. It was sold on their website. There were ten songs, but unfortunately the experiment didn’t work out too well.

According to some sources, about a third of the downloads paid the lowest premium price…one penny. It was the pre-release sales that proved more profitable.

It’s revealing that Radiohead has never repeated this process.

Following Radiohead’s lead, another band, this time Nine Inch Nails tried the same experiment, but with some notable differences.

They offered other options to get the music, like a 2-CD boxed set for $10 or a deluxe limited edition for $70, but one truly remarkable move was to uploaded the partial album to BitTorrent themselves. Here’s what they said about that move:

“Now that we’re no longer constrained by a record label, we’ve decided to personally upload Ghosts I, the first of the four volumes, to various torrent sites, because we believe BitTorrent is a revolutionary digital distribution method, and we believe in finding ways to utilize new technologies instead of fighting them.”

They even offered it under a Creative Commons license that allowed anyone to share or remix it.

How did this approach work?

Bypassing the middle man and offering the album for free, the band managed to make $750,000 on sales from the different collections they offered. Their approach generated enough interest that at one point their servers were knocked offline.

This worked because the strategy was different than Radiohead’s in a number of ways:

  • There was no “set your own price” model. Part of the album was simply free.
  • There was no way that fans could get the entire album free, even on the band’s site.
  • The strategy was more like “free sample.”
  • Each transaction led to a piece of consumer information, typically an email address that the band could use for future promotions.

Conclusion

Let’s finish this article by going back to Louis CK and see if his experiment answered the questions he asked.  Remember, he wondered:

  • Would people buy at a drastically low price?
  • Will everyone steal it?
  • Will anyone even pay for it?
  • Will it be easy to buy and download?
  • How much can one person make off of an experiment like this

Yes, to the first question. In Louis’ next experiment he might test to see if he could lower or raise the price point and see what kind of impact that would have on sales. He should do it on a smaller scale, however, or try it with a minimum viable product.

Some people did steal the video. But not very many…at least not enough to concern Louis.

Obviously over a 200,000 people paid for it. People will continue to buy even if there isn’t a middle man.

I think one of the reasons the video did so well was the ease of buying and downloading it.

And finally, his test showed that a person could become a millionaire by selling this way. Louis doesn’t want to be a millionaire, however…he says he’ll be splitting that money four ways, with a fourth of the profits going to him.

Still, a $250,000 pay out in 12 days is not bad.

What other lessons do you think we can learn from Louis CK’s online experiment?

Neil Patel is the co-founder of KISSmetrics, an analytics provider that helps companies make better business decisions.

More from Neil Patel on GeekWireSeven signs that you might just be an entrepreneur Eleven things every entrepreneur should know about innovation… 17 things I wish I’d known when starting my first business

Latest News

Comments

  • http://twitter.com/wemps Jeremy Wemple

    The one thing that is interesting to me is the three groups dont talk about what it took to market their products.  The virality of the experiment may have driven a good portion of sales.   

    Regardless, I approve and I hope this experiment that Louis, Nine Inch Nails and Radiohead have done inspire others to drop the labels and give it a whirl on their own.  

  • Guest

    How to make $1 million without a record label:

    1. Become famous through mainstream media appearances.
    2. Sell new material yourself.
    3. Profit!

  • 170k??

    Thats really awesome! However, why did it cost his film crew 170,000 to film one night??? Was Spielberg filming for him?

  • Anonymous

    While the story is informative, it misses the most important factor for the average person. You must have a following. The biggest challenge for most artists and authors is building that community. The rest, by comparison, is easy.

    • http://robiganguly.com/blog Robi Ganguly

      Ritaashley you’re right on. The most important lesson from Louis CK’s success is that this “new” media age has the same principles: you have to develop your audience and that takes time, patience, hard work and an investment in your brand. 

      Louis CK has spoken at length about how much time and effort he’s put into his craft, into working hard and honing his act, about hustling on the road in order to grow his audience and about the value of generating points of leverage for himself as his popularity grew. 

      Today’s digital environment affords us lots of channels to grow our brands and popularity and Neil, you’re a great example of someone utilizing these channels to do so, but it takes hard work and commitment and a focus on building that core asset: your loyal audience.  

  • Tjmartin66x

    Louis C.K. is brilliant.  He understands file sharing is a real culture and priced his digital product accordingly without DRM.  He also possesses charisma and that has a great way of motivating buyers.  He’s brutally honest and Carlinesque; and anyone that can make you laugh as much as C.K. will surely create a following that will want a digital piece of him in their collection.  However, what about the new and obscure ebook author?  I am a technical consultant at File Secure Pro, a drm vendor.  IP protection of PDF ebooks is our business.  Many of our clients find DRM essential.  The Megauploads of the Internet threaten the return on investment of IP for our clients.  It’s delicate balance.  Louis C.K. drm free distribution was almost risk free because he’s made his work personal for his audience.  They tacitly know that if they want more C.K., he needs a paycheck.  I think Louis should do a skit on SOPA and PIPA, explaining why he would file share.  It would probably go something like this: “I’d steal a car, for example.  I’d steal a car if the owner got to keep the car… and if everyone I ever met never bought a car in their entire life.”  

    • Ryan

      Mindy Kaling already did that bit.

  • http://www.youtube.com/user/tracksquad169?feature=mhee Teej

    My main issue would be the marketing aspect of this process. 
    How do you market these type of products?
    How can you market this product to a large audience?
    Is the marketing strictly word of mouth?
    How drastically would the sales increase if more people knew about this product? (Which can be solved by a large company)
    Point being, not only do you want to sell your product to your fan base but you want to expand your fan base, so that the next sell will top your last. 

  • utuxia

    bittorrent is and will be the new distribution channel — time to embrace it and move it from underground into the mainstream.

  • MaverickAshley Lenartson

    I love reading about what it takes to make money but just a little bit of money is all one really needs to be HAPPY…a little goes a long way to making you the kind of person you know how to be in your heart of hearts…6 cameras following Louis CK around on a stage and in the audience is enough to bring up the production costs of filming one nite and more…Hmmm! Hmmm! & the key thing to learn hear is that the product was given away for FREE but FREE is the most overused word in the FREE WORLD & then some…the point: it takes money to make money and you must have boundaries with it as IF YOU DON’T be prepared to be a Victim your whole life…one must be taught the value of a wooden nickle and MORE! The Ultimate Solution? Just because you think you are going to make money doesn’t mean you are going to make any money…the older one becomes the more they begin to let go of everything and be the person they have always wanted to be: THE TRUE SELF W/O THE EGO THROWN IN! Easier Said Than Done! PEACE & LAUGHTER ALL THE TIME! iamaveryfunnyartist blogspot com on blogspot/Google! BUY THE BOOK NOW! P.S. Review it…give it a scathing review…however, IF the book makes you laugh let me know you laughed your a** off!!!

Job Listings on GeekWork