Digital Music Distribution

What's In It For Musicians?

Published in SOS February 2004
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People + Opinion : Industry / Music Biz

The success of Apple's iTunes Music Store has revitalised on-line music sales — and not just for the major record labels. Plenty of home-based musicians are now selling music digitally, and making real money. We find out how...

Simon Trask

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At the height of the Internet boom, it seemed that we might be on the verge of a true revolution in the way music was bought and paid for — one that had the potential to forge lucrative new revenue streams for established record companies and also to make home-based musicians rich beyond their wildest dreams. Sadly, it never really took off. At the level of the independent musician seeking to make a living from directly distributing their wares via the Web, the dotcom crash finished off or severely hampered many of the companies that were supposed to be bringing homegrown music to the Net-based masses. And as far as major-league commercial music sales were concerned, it was always going to be difficult to persuade customers to pay for downloadable music while the likes of the original Napster service were operational. How could you possibly succeed at charging for mainstream music when anyone could obtain virtually anything for free — albeit not legally — with a few clicks of a mouse? As a result, the major record labels steered clear of on-line sales for several years, or promoted cumbersome, heavily copy-protected schemes which offered a limited choice of material at relatively high prices, with a predictable lack of success.

But in 2003, everything changed following Apple's launch of the on-line iTunes Music Store. The success of this venture has galvanised the market for on-line music sales, and not just in terms of shifting material by major artists, either. Smaller, independent labels are now successfully selling their material via the Internet, both through the more traditional means of on-line CD sales and also by making digital files available for chargeable download. And even 'one-man band' artists have started to see some success by making use of the Internet to distribute their music.

Why The iTunes Store?

We'll look at all of these types of business in this article, but let's first consider why the iTunes Music Store (or iTMS, as it's increasingly known) succeeded when so many superficially similar ventures failed previously. It's fair to say that selling music via the Internet legitimately and successfully is a tricky balancing act. In order to maximise your chances of success by having an attractively wide range of well-known, popular music on offer, you have to be able to legally license material for sale from the world's major record labels, and of course these large companies are only going to agree to this if they feel that they will see a decent financial return on their considerable back catalogues as part of the deal. Creating a pricing structure which keeps the majors happy but still seems reasonable to on-line music consumers when compared to other ways of buying music — including traditional high-street music retail and on-line sales of physical CDs from the likes of Amazon — is far from easy, and it defeated many startup ventures that hoped to sell mainstream music digitally.

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online 01a Apple iTunes Store
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Apple's iTunes Music Store (above) has been a big commercial hit, but its very success has ensured that a crowd of competitors are now starting up, eager for a piece of the on-line action, such as the relaunched Napster 2 (top left) and Buymusic.com (below).
Apple's iTunes Music Store (above) has been a big commercial hit, but its very success has ensured that a crowd of competitors are now starting up, eager for a piece of the on-line action, such as the relaunched Napster 2 (top left) and Buymusic.com (below).
Apple's iTunes Music Store (above) has been a big commercial hit, but its very success has ensured that a crowd of competitors are now starting up, eager for a piece of the on-line action, such as the relaunched Napster 2 (top left) and Buymusic.com (below).
Apple's iTunes Music Store (above) has been a big commercial hit, but its very success has ensured that a crowd of competitors are now starting up, eager for a piece of the on-line action, such as the relaunched Napster 2 (top left) and Buymusic.com (below).
Apple's iTunes Music Store (above) has been a big commercial hit, but its very success has ensured that a crowd of competitors are now starting up, eager for a piece of the on-line action, such as the relaunched Napster 2 (top left) and Buymusic.com (below).

The Apple iTMS team managed to crack this to some extent — rumour has it that the close personal relationships between Steve Jobs and the heads of several major record labels in the States may have helped — but the licensing issue remains a difficult one to overcome. Apple were initially only able to secure licensing rights that were legally valid for sales to US-based customers, which was enough to ensure that there could be no global iTunes store from the offset. Now, though, as the number of tracks purchased at the store grows into the millions, record company executives worldwide are taking notice, and it's proving possible for Apple to secure licensing deals in other parts of the world, which should permit the territorial extension of the iTMS concept soon.

But of course, it's not just record companies that are taking notice. The iTunes store has shown that given the right balance of licensing deals, customer cost, features and useability, legitimate on-line services can generate real revenue and start to compete with free services — but this has also been a useful lesson to competitors looking for a slice of the on-line music retail action. "Now the record industry has seen what a legitimate on-line digital music sales service can be when it's empowered, that's really changed the debate over how to license music to the other services." says Mark Mulligan, research director and senior analyst at Jupiter Research, a high-profile market research company who carry out research for and analysis of the consumer on-line industry.

So it is that a host of new on-line digital music companies, or Music Service Providers (MSPs) as some are calling them, are joining the odd reborn existing one, with a growing number offering licensed major-label as well as indie back catalogue. The parade of names includes Audio Lunchbox, Buymusic, the Dell Music Store, Emusic, Musicmatch, the MSN Music Store, Napster 2 (the new, chargeable version), OD2, Rhapsody, Playlouder and Wippit, with US retailers Best Buy and Wal Mart also joining in (and no doubt presaging further retailer involvement). Like iTMS, several key on-line music services, such as Napster 2 and Rhapsody, aren't available in Europe yet due to licensing issues, but are planning to launch here in 2004.

Distribution Models

While the success of Apple's iTunes store has put the focus on the 'pay-per-download' model of on-line music sales, the various services are offering different models or combinations of models. So for instance, Rhapsody is more focused on providing streaming access to its catalogue of over 400,000 tracks for a fixed monthly subscription fee — a great solution for anyone interested in exploring new or unfamiliar music. What many of these MSPs have in common, though, is that they're still based on a server-to-client delivery and interaction model. However, UK MSPs Wippit and Playlouder have both adopted peer-to-peer filesharing as their distribution and interaction model. If you're not familiar with the peer-to-peer (or P2P) concept, it's how the original Napster service worked — users connect to each other's computers, share lists of available music files and download from each other, rather than everything happening on a central server to which others log on.

Wippit have been around for several years, and have been successful in attracting indies (currently, around 200 are signed up, providing some 60,000 tracks) but not the majors, who have no doubt been wary of the P2P filesharing association. However, now EMI and Wippit have struck a deal to put the major's catalogue on the service, though the details haven't been announced, and may possibly include a restriction to centralised distribution.

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Paul Myers, founder of Wippit, the UK-based peer-to-peer on-line music provider.
Paul Myers, founder of Wippit, the UK-based peer-to-peer on-line music provider.

"It's a huge step," says Wippit founder Paul Myers of the deal. "From our point of view, it shows faith in us as a business more than anything else. We're not the standard peer-to-peer service, we are legal and we pride ourselves on the fact that we're doing it the right way."

Wippit provide an Internet-wide filesharing service which users have to subscribe to, although the cost is a mere £30 per year (more if you pay monthly). Subscribers download a Wippit filesharing client (currently PC-only, though Mac OS X and Linux clients are due shortly, apparently), which provides the means for users to search for, download and share music files. Myers says that some of their licensing deals are for worldwide use, while others are territory-specific; songs that aren't licensed to a particular territory simply don't show up in search results for users based in that territory.

Downloaded files aren't constrained to the Wippit client; they can be played back in ordinary player software once they've been downloaded, which means that if someone is so minded, they can also be illegally placed on Web-based filesharing services like Kazaa. So isn't the system ultimately leaky? "It's as leaky as a CD is," counters Myers. "But with unprotected tracks, certainly they could do that. Most of the labels we deal with use unprotected tracks, they use the MP3 format and aren't really that fussed. They know that if they put a track on our system, then somebody's going to download it and they'll get 84p from us for that download, or they'll find it on Kazaa anyway and get a poor copy for free. One label said to me once, 'I don't care if it goes on those networks — it's cheaper than radio!'"

The Wippit client software also provides a means to advertise to the user — an essential aspect of the system, as it turns out. Myers explains that the amount payable to rights-holders per track is arrived at by putting 50 percent of ad revenue and 50 percent of subscription revenue into a pot and then splitting the total between all the downloads.

Playlouder, meanwhile, is an Internet service provider with a difference: in addition to regular broadband Internet access, they provide a licensed P2P filesharing service which operates not over the Internet, but within the 'walled garden' of the ISP's network (which is provided by Bulldog Communications), so that subscribers will be able to share files with one another using P2P programs, but not outside of the network. In this respect, they're quite different from Wippit, who are Internet-wide. Playlouder's technical trials began in November; the commercial launch is scheduled for the first quarter of 2004.

Creative Licence
Magnatune (of which more later in this article) make all the music on their web site available under a Creative Commons licence. Brighton-based Loca Records have also chosen to use a Creative Commons licence for their material. And Brazilian musician and composer Gilberto Gil is set to become the first person to release a CD under a new Creative Commons Sampling licence.
The Creative Commons project (www.creativecommons.org) has emerged as a way for content creators to attach a specific set of usage rights to their content. If you make use of a Creative Commons licence, you're not giving up your copyright (although there is a specific licence available for dedicating works to the public domain). Rather, you're in effect replacing the standard 'all rights reserved' with 'some rights reserved'. For full details, visit the web site. And in particular check out http://creativecommons.org/learn/artistscorners/musicians to read up on Creative Commons as it pertains to musicians, and http://creativecommons.org/projects/sampling for information on the new Sampling and Sampling Plus licences, which essentially provide a means for musicians to grant others the right to sample from their work royalty-free.

Traditional Labels & The Net

While Playlouder are talking to all the majors about getting their catalogues onto the service, as usual it's the more adventurous indie labels that are climbing onboard first, with Beggars Group, V2 Music, PIAS Recordings and Ninja Tune all licensing their entire catalogues to the service.

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Wippit's (currently PC-only) filesharing client.
Wippit's (currently PC-only) filesharing client.

Beggars Group, which consists of six 'traditional' record labels including Beggars Banquet, 4AD and Mo'Wax, have been very forward in adopting the Internet and licensing their catalogue to on-line music services. Beggars first licensed their catalogue to US music services Liquid Audio and Amplified.com back in 1997 and 1998. According to the Group's head of New Media, Simon Wheeler, Beggars are currently licensed to Playlouder and OD2 in the UK, and will soon be on Wippit, while in the US, they're licensed to iTunes, Musicmatch, Emusic and Rhapsody, and also to Puretracks in Canada. Wheeler feels that an awareness of the new means of distribution is essential for record companies, right down to understanding what's required technically if a label is to distribute its back catalogue via the Internet. Simply having the licensing rights to lots of songs is not enough — you also have to have the ability to encode your material to make it suitable for digital download — or hire someone who does have that ability! Each song has to be digitally encoded with so-called metadata, which is not seen by the downloading user, but which contains copyright information, as well as the track name, playback time and details of the originating artist, so that this information shows up correctly in the playback software, no matter which MSP is used to download the track. "The most important thing for any label or independent artist wanting to get their music onto these services is that they must get all their metadata and audio files in a form that can be used anywhere. Without that, you cannot do business digitally in the music industry, full stop." In the case of the Beggars Group, London-based digital music specialist Consolidated Independent is providing the metadata and audio-encoding services required for Beggars to get their tracks onto the iTunes Music Store, and is currently integrating with the other services to which Beggars license their catalogue.

Beggars Group also maintain web sites for their labels. From these, the group runs its own streaming radio station, a community forum, a mailing list, and an on-line mail-order shop for physical media sales complete with streaming audio samples for many tracks. In addition, they have a stake in Playlouder.

"The management here have been really far-sighted," observes Wheeler. "They saw the digital revolution coming six or seven years ago, and realised the Internet was going to give us a new shopfront for our music. I wouldn't say it's going to level the playing field by any stretch of the imagination. But indie labels have traditionally found it very difficult to get onto radio or TV, or even into print media, so the fact that you've got this new opportunity is fantastic. Obviously, the difficulty then is getting people to come and look at your shopfront, but at least there's an access point which we never had before. And we have fans all around the world, so it's a really valuable way of reaching them."

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Beggar's Banquet's web site. Note the advert for the Playlouder service on the bottom left of the screen.
Beggar's Banquet's web site. Note the advert for the Playlouder service on the bottom left of the screen.

Wheeler describes physical media sales from Beggars' site as "a cottage industry". He explains: "They're a tiny proportion of our overall sales. People come for the more specialist side of things, like vinyl singles that aren't available in most territories in the world. When we started the on-line shop six years ago it was 80-percent North American business, but now we have people buying from over a hundred countries."

Meanwhile, he describes download sales from the on-line services as "still a very nascent business. No-one could run a business on the quantities that are coming through if they were going to stay at that level. But what we are noticing is that the quantities seem to be doubling quarter on quarter — and we haven't seen a statement from Apple yet, which is going to be very interesting. All these other services are rolling out, and I think we're going to see massive growth. It might be a significant part of our business in a couple of years."

Wheeler says Beggars have been very proactive in approaching the on-line services to license their catalogue to them, but that negotiating licensing terms can be an uphill struggle: "The bigger record companies think that because they've got so much more in the way of back catalogue, they should be getting more money per track. We strongly disagree with that."

Thinking Small — Micropayments
The abililty to make small on-line payments (known as micropayments) is a dream which predates the commercialisation of the Internet, but is only now starting to come to fruition. Various payment systems are now emerging to facilitate micropayments, which are both fuelled by and fuelling the trend towards paying for on-line music. As well as Paypal, there are the likes of Bitpass (www.bitpass.com), Peppercoin (www.peppercoin.com), Earthport (www.earthport.com), Metacharge (www.metacharge.com) and Yaga (www.yaga.com).The list of featured sites mentioned at www.bitpass.com/share includes a number of musicians and labels who are trying out Bitpass' micropayment technology while it's in beta (Nick Webb at Farfield Records, who is mentioned elsewhere in this article, is one of them).
Meanwhile, Earthport's technology is powering MusicPay (www.musicpay.net), a new on-line payments service tailored for the music industry which is currently being tested by London-based on-line music and e-commerce specialists The Music Engine (www.themusicengine.com) for launch in late January at MIDEM.

UK & International Licensing

Ideally, says Wheeler, this is where an organisation like the Association of Independent Music (AIM) in the UK can step in. AIM, which started up at the end of the '80s as a UK trade body designed to help independent record labels, have developed to play an important role in the licensing of digital download rights for independent UK-based record companies. Their position is not unlike that of PPL with respect to the distribution of UK performance royalties, except that AIM's focus is on collecting and distributing revenue earned via the Internet.

Wheeler sees AIM's role as central over the coming months and years — not surprisingly, perhaps, as he is Chairman of the organisation's New Media committee. But he holds this view with good reason — as he explains, when the US MSPs start up in Europe this year, AIM should be important players, as one advantage of membership is that a label can benefit from any collective licensing deals that AIM negotiate on behalf of their members. "Collectively, our weight, certainly in Europe, is equivalent to or larger than any of the majors. All the indies together have got a 25-percent market share."

AIM are open to any size of indie label down to the one-man-band DIY level, the only requirements being that the label is UK-based and pays a joining fee of £117.50 including VAT, and nine percent of any PPL income they receive, requiring in turn that they be a member of PPL (for more on AIM, check out the third part of our series from 2002-3 on setting up and running your own record label, available on the SOS web site at www.soundonsound.com/sos/nov02/articles/diylabel3.asp). Membership does not mean, however, that your Internet earnings are automatically exclusively administered by AIM. According to a resolution adopted at the 2001 AGM, agreements relating to digital download, filesharing and on-demand streaming services require an express opt-in by a label.

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AIM (the Association of Independent Music) plan to be to Internet-earned music royalties in the UK what PPL is to performance royalties — the central administrative body acting on behalf of all UK musicians.
AIM (the Association of Independent Music) plan to be to Internet-earned music royalties in the UK what PPL is to performance royalties — the central administrative body acting on behalf of all UK musicians.

If you want to get your music onto the US services, you can look to a US-based third-party digital licensing aggregator such as CD Baby. Started in March 1998 by musician Derek Sivers as a way to sell his CDs on-line, CD Baby have grown to become a very well regarded on-line resource for anyone looking to buy independent music. According to stats posted on their web site, they're now second in size only to Amazon as a retailer of independent CDs; 49,216 artists sell their CDs at CD Baby, and 632,690 CDs have been sold on-line to customers, with $5,058,849.11 paid to artists so far.

Until recently, CD Baby have always been about selling CDs on-line. However, earlier this year, with the arrival of iTMS, the company decided to become a digital distributor as well, in order to enable independent musicians to get onto these services. To this end, they have negotiated contracts with all the major services, and at the time of writing, they are sending audio and data to AOL's Musicnet, Audio Lunchbox, Buymusic, Emusic, Musicmatch and Rhapsody for all those artists who've signed up to their digital contract, with more on-line services to come. What's more, the digital distribution service is free for CD Baby members; check out www.cdbaby.net/dd for details.

Another US company providing a mixture of on-line CD sales and on-line digital music distribution services to independents is The Orchard, which licenses independent artist and label catalogue to on-line music services in the US, UK and mainland Europe. There's plenty of information on both web sites, so look carefully at the details of what they're offering before you decide whether or not to sign up. However, it's clear that there's an infrastructure coming together to enable even small independent labels and DIY artists to get onto all the digital music services.

The Independent Musician

However, this doesn't mean there's suddenly an automatic route to riches and fame. With so many thousands of major and independent artists coming onto these services, you could easily languish in obscurity if you haven't already built up a fanbase by other means. Toby Slater is a London-based independent musician who had chart success during the '90s as singer and songwriter in the band Catch, who were signed to Virgin Records. The band negotiated an end to their deal following several staff changes at the label, and the members went their separate ways. Slater went on to launch his own web site in March 2000 and to become the first UK indie artist to have a track promoted on the original Napster as part of the filesharing service's Featured Music Program — a coup which gained him tens of thousands of track downloads and visits to his site. "It was a really amazing time, because everyone who was into P2P was on Napster, and because of that, Napster had a catalogue of literally everything," he recalls. "But now people are more spread out over different networks, so things are a bit more tricky in terms of promoting on peer-to-peer. And Kazaa's catalogue tends to be a little bit more mainstream, so people tend to be going on there to download well-known music or movies, and there are fewer people looking for independent music."

Slater adds that he plans to test out Altnet, the technology that Sharman Networks is using to promote and sell music legitimately over the Kazaa P2P network. "You do have to try these things; you can't be scared of them. And if people are copying your music anyway, what have you got to lose? You may as well make it available to them, and at least give them the choice of paying. It seems ridiculous to complain about people not paying for your music if you don't let them pay for it on-line.

"Things are getting quite exciting in terms of the legal music services now. I think at the moment there's a window of opportunity for bands. The fact that my stuff is going onto iTunes via CD Baby and I've got my stuff on Wippit is an example of that. But in the long term, I think we'll probably find that the new model will end up being rather like the old one."

Slater comments that with the growing number of legitimate music services becoming available, the P2P networks will soon be under a lot of pressure to start charging people money. "The sooner someone comes up with a scheme whereby the P2P networks can start paying artists, the better, whether it's put together by governments, by record labels or by the networks themselves."

Slater's own web site is a good example of how effective a well-designed artist site can be, from the engaging design, easy navigation and fast-loading pages to the inclusion of many features that add value to an artist's site, namely a mailing list, discussion board, weblog, videos, gig listings, an on-line donation facility, and an on-line music shop selling MP3s, CDs and ringtones of his songs. "The great thing about MP3s is that there's no real work involved once you've got it all set up," comments Slater. "People buy MP3s and it happens in your sleep; the money just rolls in, which is nice. As opposed to CDs, where you've got that issue of fulfillment; you've got to have someone to be able to package them up and post them."

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CD Baby, the well-known on-line distributor of indie CDs, are now helping indie artists get their music onto the digital music providers.
CD Baby, the well-known on-line distributor of indie CDs, are now helping indie artists get their music onto the digital music providers.

Even assuming they have customers willing to pay for their music on the Internet, all of the smaller companies selling music via their web sites have a similar logistical problem, whether their material is available in the form of digital downloads or physical CDs — namely, how to obtain the money people want to give them. As Internet-based fraud becomes more widespread, many potential music consumers are reluctant to send their credit-card details off into the ether, and cheques are so slow that they negate much of the immediacy of Internet transactions, especially for business conducted overseas.

Fortunately, this is where companies like Paypal come in, who have made their reputation as a reliable, honest intermediary company to facilitate on-line payments. Once this idea became established, many similar companies sprang up, meaning that on-line musicians looking to sell their musical wares via their sites now have a bewildering selection of potential payment companies to choose from.

Toby Slater uses a company called Worldpay as his payment provider, but says they're quite expensive, especially for small payments. "I wouldn't really recommend them any more, although when I started, they were pretty much the only one. If I was doing it again, I would go for something like Paypal or Metacharge."

So there are plenty of ways for small artists to make money from on-line sales. Slater is upbeat about the situation. "The piracy issue that the major labels are forever bringing up; that's almost irrelevant for small artists. Their concern is making sure that people know to come to their site, and once the people are there, that they can buy stuff from it. That's the challenge. Part of that involves other forms of promotion, like getting your stuff on the radio or wherever you can, so that people will hear it and then end up at your site. People on the whole tend to search for music that they've already heard of. You can definitely pick up incremental occasional sales from people who've just discovered you on-line, but that's not how most artists sell their music."

A good example of just what can be achieved with on-line music sales and distribution at a grass-roots rather than big-business level is Farfield Records. Based in Southampton, ambient label Farfield was started in 1998 by Nick Webb as a way to sell his own music CDs on-line. The site went live in 1999, in the heyday of the original Napster and dotcom euphoria, and over the years Webb's operation has grown into something altogether more ambitious, incorporating albums from other artists and labels in the ambient, electronica and trance genres who've contacted him through his web site at http://labelsound.com. Most recently, he too has expanded into licensing music to businesses through his web site. Yet the whole operation is still run by him as essentially a one-man operation from a room in his house.

"I've got a programmer who runs the web site for me, and I've got freelance graphic designers who do design and artwork for the web site. They're all either friends or people I've got into contact with through the Internet. I take care of all the uploading and updating of the site. Things like logos and CD covers are all done for me by various friends and colleagues. I deal with lots of other labels and musicians, so it doesn't feel like a one-man operation, but I guess it is really."

Webb has been successful in licensing onto Emusic, Rhapsody, AOL Musicnet, and Wippit, and says he's currently speaking to OD2 about getting onto their distribution platform and trying to make contact with Apple about getting onto iTMS. "We've been with Emusic for two and a half years now, and there's about 30 albums now that we've released through them. Obviously, as well as releasing my own label's stuff, I've licensed in music from other labels and artists who haven't released digitally. So I've got quite a few licensing agreements in place."

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London-based musician Toby Slater did nicely out of Napster back in 2000, but has now turned to Wippit and CD Baby to distribute his material.
London-based musician Toby Slater did nicely out of Napster back in 2000, but has now turned to Wippit and CD Baby to distribute his material.

Webb says he takes a 30-percent cut of the income from the download services and pays the artist 70 percent. The contracts he has with artists are for named sites rather than for general digital distribution, and the artist decides which albums he wants to put through Farfield. "The contract's pretty open, actually," says Webb. "If they brought out another album themselves, and wanted to put it out via somebody else, then they could. Being an artist myself, I realise that it's actually in everyone's best interests to do it that way. More people sign up in the first place if you have a friendly contract, so it actually works out in my own interest in the long run."

Webb says he has a lot of unsigned artists who come to him with glass-mastered CDs already produced and pressed. "In the traditional way of being a record label I would have produced those CDs, but there's no point if they already have them. So usually I'll buy the CDs from them at a wholesale price, sell them through the site, and then at the same time do one of the licensing deals and put the album out under my label on various subscription services. It means I don't have to actually hold vast stock or produce the CD myself, in many cases. But also there are some artists I've put out on these services where I've never sold their CDs; they've just sent a CD-R and I've got some artwork made up. Equally, there are others where I've pressed up the CD, if I thought I could sell enough to make the money back. It's flexible, really."

Webb pays out money to artist and labels every six months. Some he sends cheques to, but in most cases he pays them using Paypal, which he says is quite convenient. For on-line payment processing of customer orders he initially used Netbanx, but has since moved to Protx. "Netbanx is the one to use if you're just starting out, because you don't have to have a trading history to use them," he explains. "They have a bureau merchant agreement and take the payments on your behalf, but then they hold the money for 30 days, and charge you eight percent plus VAT. Once I had a trading history behind me and my income was going up, I got a merchant agreement with the bank and changed to Protx, and now I pay something like two percent and the money's in my account within five working days."

Business is going well, Webb says, with no sign of dwindling CD sales. "For the last year or so, my sales have gone up every month without fail, and they've probably quadrupled in the last 12 months."

The World's A Stage — Live Music Via The Web
Back in the '70s, a whole community built up around the non-commercial trading of taped Grateful Dead gigs, with the band's blessing. More recently, an on-line community has built up around http://etree.org, which has brought the tape-trading practice into the modern filesharing age. Fan recordings of gigs by bands who permit their concerts to be recorded (there is a list on the site) are digitised into a lossless compression format known as Shorten and made available non-commercially via the Internet (see also www.archive.org/audio/etree.php). However, bands are also starting to see the commercial possibilities in making recordings of their gigs available on-line. Phish have established www.livephish.com where they sell soundboard recordings of their gigs digitised in MP3 and FLAC (Free Lossless Audio Codec) formats. Similarly, at www.primuslive.com, Primus are selling soundboard recordings of their Tour de Fromage 2003 gigs in MP3 and FLAC formats. Pearl Jam sold double-CD recordings of their world-tour concerts on-line, several of which entered the Billboard Top 200. And now there are commercial web sites emerging which are specialising in making live gigs available on the Net, such as Digital Club Network at www.dcn.com, and the fledgling HearItAgain at www.hearitagain.net.

'We Are Not Evil!'

In contrast to Farfield's veteran presence on the web, Magnatune have only recently launched. The brainchild of programmer and musician John Buckman, Magnatune — described by its founder as an 'open music record label' — exemplifies the opportunities afforded by the Internet to anyone who wants to try to do something differently. The idea came about as a result of Buckman's observations on the failings of the music industry, in particular how badly it treats artists. His observations were lent added weight by a disastrous experience his wife had when she released an album on an independent label in the UK, where the label subsequently, as he puts it, "got screwed at every turn."

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Nick Webb of Farfield Records.
Nick Webb of Farfield Records.

Having built up his own software company over the past nine years to the point where it employs 42 people and now "runs on its own", Buckman has turned his attention and energies to making a go of Magnatune. The fledgling label has already attracted quite a lot of attention on the Internet, partly for their tongue-in-cheek tag-line 'We are not evil' and the fact that it releases all its music under a so-called Creative Commons licence — specifically, the Attribution-NonCommercial-ShareAlike licence, which essentially means the music can be freely copied, remixed and sampled for non-commercial use. This is something to bear in mind if you're thinking of approaching the company (for more on Creative Commons licences, see the 'Creative Licence' box earlier in this article). In fact, Magnatune do a number of things differently. Their artists are signed up to non-exclusive contracts which are only for the music they submit, and they aren't tied in for any minimum term — but then you won't find Magnatune giving out advances, either. Customers can choose how much they want to pay for an album, within the range $5-18, and all download revenue is split 50/50 between the artist and Magnatune. Music is sold from the site as downloads only, with Buckman taking the view that the prevalence of CD burners nowadays means people can burn their own CDs if they want to. Once a customer buys an album, they can download it track-by-track in MP3 or WAV format, or as a single zipped file in MP3, Ogg Vorbis, FLAC or WAV format.

An important feature of the Magnatune experience is that you can listen to all the available music as high- or low-bandwidth MP3 streams without having to pay anything. You can choose individual tracks, whole albums, or continuous genre-based compilations. While there isn't any payment mechanism as such for the streaming listening, Magnatune do have an on-line donation feature; the web page also lists previous donations, with the highest so far being $150. Buckman says that currently the conversion rate of visitors to buyers is about 50 to 1. But he's happy with that: "I expected a lower rate of conversion, because you can just listen to music forever on the site, you don't have to pay, and the quality's good" he says.

online 09 John Buckman.s
John Buckman, head of the decidedly 'not evil' Magnatune.
John Buckman, head of the decidedly 'not evil' Magnatune.

There's also another side to Magnatune, namely the licensing of music from the label's catalogue for commercial use, again on a 50/50 split. In keeping with Magnatune's twin themes of openness and Internet enablement, the licence-selection process is entirely on-line and automated, and features transparent pricing. "I'm going after people who aren't part of the music-licensing establishment," says Buckman. "So, for example, I get a lot of licensing from webmasters, who see me as friendly to e-commerce."

Magnatune are not another MP3.com or IUMA, accepting all comers. Rather, the music that makes it onto the site is all selected by Buckman from the submissions he gets. "My acceptance ratio is about five in 200 submissions, so it's a huge filter," he points out. And it certainly shows in the high quality of the music available on the site. As this is written, there are almost 70 artists on Magnatune, spread across classical, electronica, new age, world, metal and punk rock, rock and pop, and 'other' genre classifications, with classical having the most artists and the most sales (around 40 percent). Europe is actually a slightly larger market for Magnatune than the US, accounting for some 40 percent of sales (a fact which Buckman puts down to the preponderance of classical music and electronica available on the site), while the UK is the largest single country for sales outside of the US, at around 15 percent. John Buckman says he can add between 10-25 new artists a month to the site. However, although he doesn't envisage a cutoff point, he's also wary of letting the number of artists grow too much compared to the growth in number of visitors to the site, as that runs the risk of demotivating artists by spreading the earnings too thinly. Not that any artist is going to earn a living solely from Magnatune, let alone get rich — at least, not currently. Buckman says that on current sales figures, the top five percent of earners will pull in $6-10,000 a year, the average top third around $3-4,000, and the middle range around $1-1,500. "Unless you want to sign with a major label and go exclusive, you should probably look for as many non-exclusive ways as possible to get your music out there," he advises. "Just get it out there. That's the basic idea with Magnatune — it's another way for your music to get some attention."

What Next?

With Apple having admitted that the iTunes Music Store in itself isn't profitable for them (although it's done wonders for iPod sales), and with the potential for competition to drive down prices in an easy-compare on-line environment, it remains to be seen how the viability of the emerging on-line music stores will work out. Meanwhile, although the original Napster is no longer with us, there's still the challenge of the other free filesharing services like Kazaa, whose usage figures remain high. Still, with what could be a critical mass of legal on-line music services beginning to get off the ground in 2003, and with the Internet's ongoing ability to throw up challenging (if fringe) alternatives like Magnatune, the coming year is going to be interesting — not least in Europe, where we'll see a rich variety of legal music-download services for the first time.

Useful Web Links
APPLE ITUNES MUSIC STORE
ASSOCIATION OF INDEPENDENT MUSIC (AIM)
AUDIO LUNCHBOX
BEGGARS GROUP
BUYMUSIC
CD BABY
CD BABY DIGITAL DISTRIBUTION
CONSOLIDATED INDEPENDENT
CREATIVE COMMONS
EMUSIC
FARFIELD RECORDS
MAGNATUNE
MUSICMATCH
NAPSTER 2
OD2
PLAYLOUDER
RHAPSODY DIGITAL MUSIC SERVICE
THE ORCHARD
TOBY SLATER
WIPPIT

 

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