Thanks to iTunes, on-line music distribution is a reality — but can you really use it to make money from your music?
There can be no doubt that on-line music downloads are now an integral part of contemporary culture, and increasingly of the music industry. Apple's success with the iPod and the iTunes Music Store has been remarkable — over a billion tracks have been sold at the time of writing, and the Store is now open for business in 21 countries from Denmark to Japan, Australia to Sweden. And in just a couple of years, downloaded music in the UK has gone from having its own separate chart to forming a major component of the sales that determine the Top 40 singles chart each week.
Of course, the downloadable sales model espoused by Apple isn't the only one — streaming and downloadable subscription models are used by the likes of Emusic, Napster, Playlouder MSP and Rhapsody. And while Apple uses the AAC file format and 'digital rights management' software, or DRM, as it's euphemistically known, on the tracks they sell at the iTunes Store (in other words, copy protection), many indie-focused services prefer to stick to high-quality MP3s with no DRM, preferring to trust fans to buy music by the artists they like rather than sharing it for free. Warp Records' site at www.bleep.com is a prime example of this approach, selling albums from over 200 indie labels in MP3 format for £6.99, or at 99p per track.
Meanwhile, the new breed of digital music distributors like CD Baby and The Orchard support unsigned artists not only by selling their CDs on line, but also by acting as so-called 'aggregators', and getting unsigned music onto a wide range of on-line music services that won't deal directly with individual artists (for more on the former, see my article in SOS February 2004 at www.soundonsound.com/sos/ feb04/articles/onlinemusic.htm). The Independent On-line Distribution Alliance (IODA) is another body which has emerged more recently to enable independent rightsholders to get their music into the digital music outlets in return for a portion of the licence royalties paid out by the on-line services. IODA provides on-going rate negotiation, audio-encoding, data-management and reporting services, and of course handles the administration and distribution of royalties. By aggregating music from independent labels and musicians, it is able to provide collective bargaining power; the company works with over 750 indie labels of a variety of sizes, and now distributes a catalogue of over 200,000 tracks.
The likes of IODA are helping to level the on-line playing field for independent artists and labels who otherwise wouldn't have the resources and the ability to compete on-line with the majors. Over the past couple of years, podcasting has arisen as another way to get homebrew music out to people, and Apple's adoption of podcasting in its iTunes store has helped greatly in raising its profile. The term 'podsafe' has come about to describe music which is owned by the artist and released under a Creative Commons licence, thus removing any restrictions on the use of such music when it is broadcast non-commercially (for more on Creative Commons, see www.soundonsound.com/sos/ jan05/articles/creative.htm). Such is the profile of music podcasting in the States that the US royalties body ASCAP recently introduced interactive and non-interactive podcasting licensing agreements.
Another musician-friendly success story has been the rise of Myspace, a 'social networking' web site which has become a popular place for signed and unsigned musicians to post their work. The music section of the site allows surfers to search by category, keyword,or musical genre, and site users can be notified of upcoming gigs and events relating to the bands they follow through Myspace. Such features have proved a hit with the under-30s, leading to a flood of trendy articles focusing on 'The Myspace Generation' and no doubt contributing to 2005's successful sale of Myspace's parent company to Rupert Murdoch's News International for 580 million dollars.
The Musicians Speak
These are just some of the new ways musicians can use the Internet to obtain a wider audience for their music. But what do the musicians themselves think? Neil Leyton, label boss for forward-thinking indie label Fading Ways and an artist in his own right, has a typically pragmatic indie attitude: "Any new technology presents challenges to and opportunities for an existing business model. The Internet affords artists huge promotional potential and the prospect of new distribution models. It's best to work with it rather than against it, respecting the artists' wishes on how they want to be marketed."
But as it becomes easier for unsigned artists to promote, distribute and sell their music on line, are labels becoming less significant? Leyton: "That depends on the label. Artists still need someone to handle the business of selling pieces of plastic and distributing them, or, alternatively, marketing their on-line stores to drive fan traffic towards them. It's all a question of adaptation — and dinosaurs have trouble evolving. Labels and artists should become equal partners in the age of the Internet, as opposed to artists being owned or controlled by labels. There is no need for an artist not to own their copyright, for example."
One highly evolved organisation whose very name calls the need for record labels into question is AWAL, or Artists Without A Label. Like CD Baby, AWAL enables independent artists and labels to get onto iTunes and its ilk. AWAL UK now represents around 400 organisations ranging from unsigned artists to labels with whom iTunes won't deal directly. "Just think of the manufacturing muscle that would traditionally have been needed to reach, say, eight million people in Europe and North America" says Paul Bower of AWAL UK. Now you can do that by uploading the contents of a single CD-R. It's the smaller independents that will really flourish. While they have smaller budgets to play with, they can now shift more funds towards promotion rather than manufacturing."
"The rapid development of a digital music supply chain, pulled by the success of iTunes, is enabling more recorded music to get into the marketplace than at any time in history," says Paul Sanders, co-founder of Consolidated Independent, a company which specialises in encoding music and submitting it to the growing number of on-line music stores. "And we have all discovered now that there's no future in pretending that a digital product is somehow the same as a CD, which almost everyone has up till now." Indeed, thanks to digital stores like iTunes, people can sample and often buy individual tracks, not just whole albums. More radically, the subscription model moves music purchasing beyond per-track or per-album pricing models to an all-you-can-eat service. Paul Sanders and Consolidated Independent are also involved in on-line music retailer Playlouder MSP, which offers a music subscription service of the latter type, in this case allied to a broadband ISP. Playlouder MSP has attracted many independent labels and musicians, but also has a deal with Sony/BMG. For Sanders, Playlouder is leading the way in an approach that will become much more common.
"As I see it, there's a growing realisation that applying a per-unit revenue model to on-line music leaves too big a gap to be enforced through legal action and copy-prevention technology," he observes. "The more appropriate model is a broadcast-style licence with royalties collected by either application or network providers, such as we're adopting with Playlouder."Live Transmissions, the latest Steve Hillage album to be released under the name System 7, is available from a variety of sources, including the iTunes store and Steve's own web site.Guitarist and composer Steve Hillage, who with his wife Miquette Giraudy operates as System 7, is a long-time user of the Internet. System 7 started putting up music clips on their site from the late '90s onwards, and began exploring the possibilities afforded by selling on-line downloads in 1999. "We've now got quite a clear strategy for selling our stuff as downloads" says Hillage. "We're putting our whole catalogue on-line, including some exclusive stuff that's previously only been available on vinyl. CD singles are often uneconomic, but as a download people can burn it to CD or play it on their iPod. We're not going to stop releasing CDs and vinyl, we just see downloads as a new arrow to add to our quiver."
Acknowledging that iTunes is the place to be for downloads, System 7 now have 14 albums available on Apple's Store, and recently released an iTunes-exclusive LP of remixes. "If you're not on iTunes, you're not digital," says Hillage. "You can quote me on that. It's had a significant effect on our revenues, though we're getting quite a lot of sales from Napster as well. In the past year we've signed up with IODA as our digital distributor, and I would highly recommend them to anybody. Within one month of signing up with IODA, our tracks were out in the USA. Pretty damn good!"
P2P, DRM & Weed
Peer-to-peer (or P2P) filesharing is the perennial thorn in the side of the majors, but indie musicians and labels have typically adopted a more relaxed attitude, preferring to see filesharing as free marketing. Steve Hillage: "People have been getting free music for nearly one hundred years. It's called a radio, you know what I mean? I don't think filesharing is a bad thing in moderation, because it helps you get your music heard. And everyone's happy when their music is played on the radio, so there's a certain amount of hypocrisy there. I try to have a balanced view of filesharing, because it's not going to go away."
Neil Leyton feels that filesharing is great for independent musicians. "Provided they're genuinely driven by cultural exchange and not a third-party moneymaker, these services should be allowed to exist. Anyway, filesharing is a fact of life, much as home taping was a fact of life in the '70s and '80s. It's cultural exchange, and artists should embrace it as such."
Leyton isn't suggesting that music should simply be free; selling more recordings is his ultimate goal. "If someone hears an MP3 file for free, they can then decide whether they want to buy it and support that artist. Not every transaction or exchange needs to be a financial one, nor do we believe that anyone is ripping our artists off by downloading their work. On the contrary, it's great promotion. If you're selling more records as a result of P2P, then it's just fine with us that those filesharers are not paying anything for the right to listen. Filesharing is not piracy, no matter how many major PR campaigns are launched to try and beat that into our social consciousness — and it allows people to sample more music than the radio can offer. Music fans are the life-blood of an artist's career. They are certainly not pirates, and if they want to hear music for free it is out of their appreciation of that artist's work. If they like it, they will continue to support and endorse that artist in a number of different ways, from buying a record to wearing a T-shirt to going to a live concert."
DRM typically marks another distinction between major and indie approaches to selling music on line. Apple had to use DRM on its iTunes tracks (albeit a relatively light version) in order to get the major labels on board. But, as mentioned earlier, many indie sites sell DRM-free MP3s, seeing DRM as an unnecessary inconvenience. Another option, adopted on System 7's site, is to give fans the choice; DRM versions of tracks, at 79p each, are cheaper than the 99p non-DRM MP3s, reflecting DRM's inherent inconvenience. However, Steve Hillage says they're now moving to MP3 only, because the MP3 files have been outselling the DRM ones by a ratio of 15 to one, despite the latter's cheaper price. And the changes won't stop there. "Dance music downloads have blown up in the past year, and beatport.com, who are the leaders, have started using WAVs," comments Hillage. "Once broadband speeds get a bit faster, MP3s are going to be history. It'll be WAVs or AIFFs, and that's the true nightmare of the record companies — or not. It depends how creative people in the music industry are."
"Generally, my feeling about DRM is that it penalises the people who purchase the track" says independent artist Toby Slater, an enthusiastic adopter of the Internet since the days of the original Napster. But not all DRM is created equal. Recently, Slater has found his music appearing as so-called Weed files thanks to a deal between CD Baby and Weed developers Shared Media Licensing. He points to the Weed system as a way in which DRM can work for artists and fans: "The fantastic thing about Weed is that it rewards the people who pay for tracks, and it rewards you for passing them on. That's the opposite of most DRM, which just limits you."
Weedshare is a system developed by Shared Media Licensing (SML) which challenges the assumptions of those who only see the negative side of DRM. Essentially, Weed uses a Windows DRM-based system to enable fans to be rewarded for sharing tracks by allowing them to share in the track revenue. The centrally-managed DRM limits the number of times an unbought track can be played (to three plays), and tracks the chain of purchases. Fifty percent of any purchase goes to the track's artist, 15 percent to SML, and the remainder goes to the sharers, divided 20, 10 and five percent through three stages. So if someone buys a Weed track that they got from you, you get 20 percent, while if someone then buys the track from them, you get 10 percent of that purchase, and on one further stage to where you get five percent. If a track costs you a pound, you get 20p, 10p and 5p respectively from every person who subsequently buys the track. How much money you get obviously depends on how many people download it from you in the first place and then buy it, and on what subsequently happens to the track. See www.weedshare.com/share/musicfans for a more detailed explanation.
"It seems obvious to us that filesharing is, in effect, free promotion and distribution — so it can't be all bad," says Shared Media Licensing co-founder John Leighton Beezer. "That was the basis of the idea that it was OK to pay people to share. It was a friend of mine who proposed the idea to me; he called me up one day and said he'd figured out how to make DRM work for music. I was very sceptical at first, but he convinced me. We know that our files can be hacked, but we're trying to create a positive alternative to standard on-line distribution."
So-called Independent Content Providers (ICPs) are approved by Shared Media Licensing to do A&R, set up rightsholder accounts, verify rights, encode the music tracks, and work with artists to promote their music as Weed files if that's what they want. An ICP then gets all 35 percent when someone buys a track from their site, because they're the first provider. "In a lot of cases, record labels have an in-house ICP for working with us," says Beezer. Another feature of the Weedshare approach is that anyone can set up as an on-line music 'store' by hosting existing Weedshare tracks, and earn revenue through the 15/10/5 system. There's no need to set up an e-commerce capability, because SML handle all the sales and the distribution of revenues.
Music On Mobiles
While the Internet is maturing as a music sales and marketing medium, it's still early days for music in the mobile world. "Mobile music sales are still very much focused on the big seller, the chart hit, with the top 20 percent of overall content generating 80 percent of the total revenue," observes Steve Hayward of Mobile Streams, a company that sits between the music business and the mobile networks, liaising with both to make music available on your mobile. "But there is growing pressure for change. In the same way that the Internet music download market has given a new lease of life to jazz and classical music, I think we'll see mobile music diversify into more niche areas."
Heyward describes Mobile Streams as a media company with a production facility. As a formatting house, it has its own dedicated image-, video- and audio-formatting teams. "Our strategy is very much to work with multiple network operators in multiple territories. In the UK, we work closely with 3, Vodafone, O2 and Orange. Approaching the networks directly is pretty difficult; they're quite entrenched in terms of who they work with. And it's hard to reach the mobile mass market if you can't work with a network operator, so it's quite difficult for small independent labels; in fact it's hard even for the large indies. We work with Beggars, Sanctuary, Ministry of Sound, and a large number of independent music suppliers."
"The mobile network operators want a closed service, whilst it's in the best interests of the music owners and third-party service providers for there to be an open environment," says Jeremy Copp of mobile music-technology specialists Beatnik. "My belief is that in the interests of creating the biggest and fastest-growing market, mobile users need to be able to have access to music from a whole range of sources, not just those dictated by the operator."
So while the Internet is opening up opportunities for indie labels and unsigned musicians like never before, will they have to resign themselves to the fact that music for mobiles will remain the province of the major labels? "There's no reason that independents or unsigned artists cannot share in the opportunities that mobiles provide," Copp says. "The authoring of music for mobiles fits into the existing recording studio workflow, and is being made much easier due to the adoption of common, standard formats. So there are likely to be opportunities to distribute content either directly or through partnerships with operators, service providers or perhaps major labels." And other broadcasters may also provide an outlet, he adds. "I can imagine radio stations and TV channels picking up on mobile audio as a promotional channel, so those stations who today promote independent and unsigned artists on the Internet will be able to extend this to mobile phones."
Another site which typifies the open approach of selling MP3s is Magnatune, the on-line music retail site set up by John Buckman to find a better, fairer way to sell music after his wife fell foul of music industry dealings. Magnatune follow a largely traditional sales model, but don't lock files up in DRM. Buckman does non-exclusive deals with artists on a per-album basis and gives them 50 percent of each sale. When buying an album, people can choose how much they want to pay for it, from $5 to $18. Magnatune also encourage podcasting — because they make all of their 128k MP3s available under a Creative Commons licence, use of these files is 'podsafe' if they are podcasted non-commercially. In keeping with Magnatune's open attitude, people can also stream complete versions of tracks and albums from the label's web site at any time. There's even a well-developed licensing side, with a very open web-based licensing interface that allows potential licence-holders to see how much they'll have to pay for their desired use. One such use is for film soundtracks; the system allows filmmakers to try out Magnatune tracks for free and only pay for them when their film enters the commercial arena.
Buckman's feeling is that iTunes has stolen the show for the consumer side of the business ("the lack of any major non-DRM site means there isn't a real contender to iTunes"), and he's doubtful that any music service dealing in mainstream genres will make any headway against them. As for the most promising developments for the independent sector, Buckman sees these in the new marketing possibilities in smaller markets, "be it on Myspace, by artists self-releasing on iTunes through someone like IODA, or the new music sources such as the Magnatune and Garageband sites."
Nick Webb first discovered the value of the the Internet for selling CDs and downloads back in the late '90s. He began selling CDs from his own label, Farfield Records, and other ambient labels in 1998, and his URL, www.ambientmusic.co.uk, became a leading destination for those in search of ambient and chillout music. Meanwhile, he did deals with on-line music services such as Emusic, Rhapsody and Wippit. Early last year, he set up a new on-line site, Shopsonic, to sell CDs and album downloads.
Webb sees on-line CD retailing as the way forward for small labels like Farfield and the various other labels whose catalogue he stocks. "Getting your CDs into the shops isn't necessarily going to get you anywhere. You've got to have a budget to advertise nationally, and with a lot of large companies, even if they do stock something from an independent, it will be tucked away at the back of the shop where no-one can find it. Having the ability to sell downloads in the same shopping basket as CDs is quite unique to our site and allows us to offer free sampler downloads and albums when customers are making a CD purchase." Perhaps unsurprisingly, download sales have been increasing since Shopsonic agreed a joint on-line licence with the UK's MCPS & PRS music-licensing bodies in April 2005. According to Webb, downloads now account for approximately 40 percent of music sales, and of those, 30 percent are from the USA. He's definitely of the opinion that downloads have helped to bring in new customers to his site from overseas.
"Bricks-and-mortar distributors can make it very difficult for labels like mine," says Fine Arts Militia co-founder, Zenstone record-label owner and bassist Bryan Hardgroove, who leads Public Enemy's live band, "but the Internet provides a distribution channel. If you mass-produce records and put them in a store, then you have a loss if you don't sell them. But if you can expose people to your music via the Internet, you can see how much people like it in whatever region you're interested in, and then you can move records where you know they're going to be wanted."
AWAL's Top 10 Presentation Tips
AWAL UK specialise in getting independent music onto on-line music stores such as iTunes. Paul Bower is one of their UK team. "When you offer your music to an on-line distributor, presentation is just as important as if you were offering the music for sale on CD" he says. "Remember, you're entering the music business; thinking about a few simple points will help you to be taken more seriously."
How to present a CD to an on-line distributor (above) and (right) how not to present it!
1) CONTACT DETAILS
"Don't just send a CD-R with a scribbled email address. At the very least it should have the artist, title, and copyright information written neatly on the disc. Better still, invest in a thermal or inkjet disc printer."
"Check your postage. A CD in a jiffy bag will weigh just over 100g, so putting a single first-class stamp on the package will result in your recipient having to collect the package from the sorting office and pay a one-pound fine."
"If your CD artwork is printed on a laser or inkjet printer, try to include a CD-ROM of the original artwork, as these rarely scan successfully. And if you send in scanned artwork, always clean the artwork and your scanner before you scan. If the scanned artwork is not absolutely straight, even to within a tenth of a degree, it will look odd when reduced down to a thumbnail. To remedy this, scan the artwork with a border to allow subsequent readjustment."
4) MASTERING & MEDIA
"You are treating your music as a saleable commodity, so you shouldn't send it off until you are absolutely happy with it; this includes the mastering side of things. Similarly, do not send out multiple disks for the recipient to compile."
5) BIOGRAPHY & FURTHER INFORMATION
"Always include a biography in your package, and type out any technical information such as copyright details, ISRC numbers, and track titles if they don't already appear on the sleeve."
"Make sure you have the rights to enter into the agreement! If you've previously signed a digital distribution deal, or your music has previously been released on CD, check your contract. You did keep a copy, didn't you...?"
7) TAKE THE INITIATIVE
"After initial contact, keep in touch by phone or email to push the deal through."
8) NO MP3s OVER EMAIL
"Don't email MP3s unless you're invited to."
"Make sure you have cleared — or removed — any samples in your recordings, and obtained permission from session players and featured artists to use their performances."
10) NO CROSSFADES
"If your album contains a lot of crossfades, think about recompiling a download version without them."
Opportunities (Let's Make Lots Of Money)
Steve Hillage says he's 50/50 about on-line music as an opportunity for independent labels and musicians: "It's something that's important to do, and obviously idealistically it's a fantastic way of bypassing all forms of corporate distribution and getting your music directly to the people that want it, which is a major plus. But as I said, it has to be seen as another arrow in your quiver."
Others are more convinced. "We're at a great time right now," opines Toby Slater. "There's access to the on-line stores, so you as an independent artist or label can get your stuff onto iTunes and Rhapsody and all those services pretty easily. You could sign up with someone like The Orchard or with CD Baby, and within a month or so you'll probably have your stuff up there and selling, which is really great."
Consolidated Independent's Paul Sanders says he remains "infinitely optimistic" about the opportunities for independent labels and musicians, but that it's important to keep a sense of realism as well. "We have to keep working hard, but technology is opening a marketplace in which anyone who has created music can participate on the same basic footing, if not on the same commercial terms. When you're in the middle of such rapid change as we are now, there are all sorts of opportunities. The key to making the most of them is staying positive. If you can't get played on the radio, make your own station, and if you can't get into the shops, join a musicians' retail web site. The technology gets easier and more effective every year."
"I'm optimistic," says Bryan Hardgroove. "The only way you can stop a smart independent is if some sort of legislation appears, some sort of worldwide restriction. At the moment, the success of on-line record sales is as available as your willingness to work. If you have good ideas, good talent and a good marketing plan, it doesn't take a whole lot of money."
"I think that we're in a window of opportunity right now for indies and artists," comments Fading Ways' Neil Leyton, "but I think the golden era is still to come. We're 10 years behind the open source movement, but I believe, as others do, that the curve will be about the same in terms of growth and the opening up of markets. True independents, creative thinkers, will thrive."
Indeed, in contrast to the limited opportunities for exposure and sales in the traditional world of physical distribution, many opportunities are now opening up for independent artists and labels to market and sell their music on line. With new marketing avenues such as web logs and podcasting allied to companies that can help musicians get their music into a wide range of web-based music stores, the independent sector has many reasons to be excited about the Internet.
APPLE iTUNES MUSIC STORE
A WAVE (SYSTEM 7/STEVE HILLAGE)
CI (CONSOLIDATED INDEPENDENT)
IODA (INDEPENDENT ON-LINE DISTRIBUTION ALLIANCE)
NICK WEBB (SHOPSONIC/FARFIELD RECORDS)
SHARED MEDIA LICENSING (WEEDSHARE)