Digital Noise: Music and Tech

Talk about a race to the bottom: a week after I pondered which digital music distribution service was cheapest, WaTunes made the question irrelevant by offering digital distribution for free. That's right--for no money down and no cut of the royalties, WaTunes promises to distribute your digital downloads to iTunes, Amazon's MP3 store, Rhapsody, eMusic, and Rhapsody.

(Credit: WaTunes)

So how does the company expect to make money? The answer became clear this week when WaTunes launched its premium-priced service, WaTunes VIP. For $29.95 a year, artists and labels will get distribution to more stores (including the Zune Marketplace), the ability to upload videos, unlimited weekly trend reports from iTunes, and a number of other perks outlined on the WaTunes blog.

Just remember: there's more to consider than price. Of the big distributors I've covered, only CD Baby offers you an online storefront for physical CDs as well as digital distribution, and The Orchard is more of a full-service digital record label, handling tasks such as marketing and licensing in addition to distribution.

Meanwhile, "pure" digital distribution services like TuneCore and RouteNote may have to add other services to remain competitive.

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Don't take my word for it that the major labels and the system that propped them up for so many years are dead. John Mellencamp, who sang a string of rock hits back in the 1980s and '90s, thinks the business is dead as well. In an articulate and passionate essay on the Huffington Post, he argues that the long slide started well before the rise of file sharing, back to when the business started relying on SoundScan and Broadcast Data Systems (BDS).

The old way of selling music is as outdated as '80s hairstyles.

(Credit: John Cougar Mellencamp via YouTube)

With SoundScan, instead of relying on surveys from record stores, the labels could see exactly how many units were being moved in any given week, and where those sales were happening. With BDS, instead of relying on phone calls to radio program directors, the labels knew exactly how many spins a song was receiving in each city. Shortly thereafter, the Billboard charts began relying on these automated systems as well. The result: labels ignored the vast majority of the country and focused on a few hits that were getting airplay in the largest cities, and allocated their A&R and marketing budgets accordingly. We ended up, according to Mellencamp, with No. 1 hits that most of the country had never heard, and the rest was a long downhill slide to today's hyperfragmented and piracy-ridden market.

It's a great essay, and I particularly like his side note that the CD was created out of pure greed, as a way to get users to replace their collections of perfectly good vinyl records. (Remember how CDs were supposed to offer clear sound forever? Funny, my CDs from the early 1990s are already wearing out and skipping, but I have records from the 1950s that still play adequately.)

But like the folks at Idolator, who called Mellencamp old and dumb, I completely disagree with his conclusion. Mellencamp says that the irrelevance of radio and fragmentation of the market means there's no organic way for music to find an audience and grow. That's completely wrong--there's more opportunity for smaller bands today than there's ever been. Yes, beginning artists might have to do more work themselves, but recording, manufacturing, and distributing an album has never been cheaper or easier. From ProTools to Disc Makers to CD Baby and Tunecore, and more recent competitors like Routenote and Audiolife, these are tools that anybody can use and master. Sure, online marketing through vehicles like MySpace can't compete with mass radio play in 100 cities, but it's available to anybody--not just the companies' chosen few. When you get a bit bigger, you can enlist services like Topspin to hype your product in the digital realm, for far cheaper than an old-fashioned media blitz. Even getting gigs no longer requires a booking agent, thanks to services like Sonicbids.

In one sense, Mellencamp's right: if you're in music to become a rock star, now's a bad time to be a musician. But if you want to have your music heard as broadly as possible, there's never been a better time.

And for those of you who couldn't sing the chorus to Mellencamp's "I Need A Lover" when you read his essay, click here.

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What should bands pay for? Can art and marketing coexist? Has the digital world made do-it-yourself recording, marketing, and distribution easier, or do musicians still need the old-fashioned triumvirate of booking agent, record label, and radio airplay to thrive?

If you're interested in such questions, and you're heading to the South by Southwest music festival in Austin, Texas, this year, check out a panel discussion in which I'll be participating called The Artist as Entrepreneur at 1:30 p.m Wednesday. Most of the people on the panel are in the business of helping musicians use the Web and other digital tools to turn their music from hobby into career--or at least sell a few CDs and get some decent gigs.

Not me! I'm a mere blogger, trying to report as objectively as possible on all these different businesses. I've got a well-developed sense of skepticism, honed by my somewhat-schizoid existence over the last 15 years as a writer and analyst covering the world of high tech (all day, every day), and playing bass in half a dozen gigging and recording bands (from which I've been on hiatus for the last year or so). I hope to provide some balance, or at least the occasional arched eyebrow, if anybody gets too self-promotional.

You can read about the other panelists on the SXSW site, but I've met Panos Panay, the moderator, and talked to him at length about the music business and his company, Sonicbids.

From the artist's perspective, Sonicbids charges subscription fees for creating and maintaining an electronic press kit, then provides an automated system for submitting that presskit to get gigs--including some pretty big ones, including SXSW, Seattle's Bumbershoot, and the Vans Warped Tour. (Full disclosure: Panos invited me to be on the panel, for which I get a free badge to the show. I'm covering travel and all other expenses out of pocket.)

Also on the panel are Derek Sivers, who founded online music marketplace CD Baby (which I write about all the time) and left last year to form a new business, MuckWork. I've also blogged about TuneCore, an online marketplace for digital downloads from independent artists, whose CEO, Jeff Price, is on the panel. I'm looking forward to meeting the other folks on the panel and hearing their stories.

Apart from that, I'll be meeting with a bunch of other companies that straddle the edge of music and technology, catching as much music as I possibly can, and if all goes according to current plan, I'll be talking to Metallica for about five minutes on Friday about its upcoming Guitar Hero game.

I'll blog as much as I can, and you can always follow me on Twitter.

Jango CEO Dan Kaufman posted a long response to my post criticizing Jango Artist Airplay as a pay-for-play scheme that artists should avoid. (He also e-mailed me with contact info, so I'm fairly sure it's him, although the usual caveats apply.) It's a thoughtful comment, and Dan comes across as a serious businessperson, not a fly-by-night scam artist.

The question isn't whether you're serious enough to spend money on promotion, but whether Jango is the place to spend it.

(Credit: Jango)

To summarize, Jango is trying to maintain a quality experience for listeners by making sure they're not inundated with Airplay artists they're not going to like. Rather than playing Airplay artists based strictly on how much money they contribute, Jango screens them all to make sure they meet some sort of quality bar. A similarity algorithm is applied, so you won't be hearing some random rap artist between The Cure and The Smiths. If a listener hates a particular song, he'll never hear it again. Artists who score poorly across the board are removed from rotation entirely and their money is refunded. Perhaps most important, Jango will only play an Airplay artist no more than once every 20 songs, so at least 95 percent of the music you hear will be music you explicitly want to hear.

All good for listeners. But from an artist's perspective, it still smells like pay-for-play. If Jango is screening Airplay entrants anyway, why make them pay? Why not just open Jango radio to emerging artists who the editors think are good enough? And how does Jango decide who needs to pay and who gets in for free? Do you have to be signed to a record label to get on Jango for free? What about independent artists who are suddenly the subject of a lot of searches at the Jango home page? (Probably not--too easy to game.) Where's the line?

I understand that every company needs revenue, but there's a difference between companies that charge a flat fee for a particular service, and a company that discriminates downward by charging only those artists who can least afford it. CD Baby, TuneCore, and nearly every other company that caters to independent artists has a standard price list--if you're going through them, you're paying the same fee or percentage, no matter who you are or how popular you become. They have enough faith in the value of their service that they can set a universal price and watch the money roll in (or not).

The biggest red flag for me comes when Dan mentions artists who are "serious enough about their career to spend money on promotion." As a musician, I heard variations on this theme all the time and it drove me nuts: "You've got to spend money to make money"; "You've got to invest in your career."

No kidding? Ask any musician how much money they've spent over the years on musical gear, rehearsal space, recording equipment, studio time, CD manufacturing, mailing envelopes to radio stations and labels, building Web sites, registering domain names, printing fliers, paying people to hang those fliers, paying club fees (sound guy, security) out of their take of the door, and on and on and on. We all spend plenty of money, thanks. The trick is spending it wisely. While still spending most of your time and energy making music that doesn't suck.

Again: marketing is important. Marketing isn't free. But I still think a musician's best bet is to use time-tested services that charge the same amount for everybody, and then let your music sink or swim on its own. If nobody's buying, and nobody's offering you gigs, then accept that you're playing music for your own personal benefit, not as a career. And maybe in another year or another band, you'll find that the situation has changed.

Perhaps Jango will prove me wrong and manage to grow user traffic and unlock a great new revenue stream at the same time. I'll look forward to hearing updates as the program continues.

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Last week, I blogged about digital distributor RouteNote and did a brief comparison with CD Baby and Tunecore, two better-known services that help independent artists place their songs in online music stores such as iTunes and Amazon MP3.

Now RouteNote has one-upped me on its own blog and run a detailed--and very helpful--mathematical comparison of itself versus CD Baby, Tunecore, The Orchard, and Musicadium.

You can check out a direct comparison of up-front charges and ongoing revenue splits, as well as a chart showing how much money the artist will earn after selling specific numbers of songs.

RouteNote acknowledges when its service might not be the best deal--basically, when you get up to about 5,000 track sales, TuneCore and Musicadium offer more money to the artist, and at 30,000, CD Baby begins to show a slight advantage.

I found this to be a pleasant change from the usual marketingese that populates corporate blogs, in which competitors are rarely acknowledged except to be criticized. Of course, RouteNote can't resist tooting its own horn a little bit, noting that its small size makes it more invested in the success of its artists.

In the interest of fairness, I'd add one caveat: while The Orchard looks like a crummy deal for artists on a straight dollars-to-dollars comparison, it's more like a full digital record label. It handles digital distribution, as well as marketing and licensing (like getting your song on a TV show), and it works with video as well as audio.

Cheap tools to help independent musicians sell their music online are proliferating like mushrooms after a rainstorm: last month I wrote about Audiolife, which gives bands an online store to sell CDs and merchandise with absolutely no up-front costs (they take a cut of sales as you make them). Since then, Audiolife was kind enough to send me a sample CD and t-shirts, and they look and sound adequately professional--certainly fine for independent musicians on a limited budget, although nobody's going to confuse them with the deluxe version of the latest U2 album.

Upload your files to iTunes and other major online music stores with no up-front costs.

(Credit: RouteNote)

But Audiolife's download store is a little weak: instead of placing your songs in Apple's iTunes store--which accounts for more than 80 percent of online music sales--and other high-profile venues like Amazon's MP3 store, Audiolife creates a widget that you can place on your own Web page or social-networking site. That's fine if you've got a lot of fans already visiting your Web site. But what about more general music fans who often shop for music online, but wouldn't go out of their way to go to your Web site--think friends of friends, or music lovers who read about new bands online or in a paper. Do you really want them to come up blank when they run a search on iTunes?

CD Baby and Tunecore already offer digital distribution through iTunes and other stores, but both of them charge you money whether you make a sale or not. In contrast, U.K.-based RouteNote charges you nothing until you make a sale, at which point they take a 10 percent cut of whatever the store pays out.

Specifics: CDBaby charges you a one-time set-up fee of $35 (which covers setting up a store for physical CDs as well), then takes 9 percent of digital download revenues. TuneCore, which does digital distribution only (no CDs) charges you $20 a year for each album they stock, but takes no cut. So on a straight numbers basis, RouteNote's a better deal than CD Baby for digital-only distribution, and a better deal than TuneCore if you expect to sell low volumes of downloads. Of course, there are a lot of other factors to consider, like customer service and speed of submission to iTunes and the other stores, but RouteNote looks like it's worth checking out.

Music industry blog Coolfer has an interesting post this week about online tools for do-it-yourself musicians in which he points to a relatively new service called Speakerheart. I checked out the service, and while I agree with his assessment of the interface--it's based on Adobe's Flex (an offshoot of Flash) and is very slick and easy to use--I think that Speakerheart, like most other digital distribution start-ups, is going to have a very hard time.

An example of a Speakerheart shelf on the MySpace page of Nashville band The Bird Ensemble.

(Credit: Speakerheart; The Bird Ensemble)

The process is pretty straightforward: Artists sign up with Speakerheart to sell their songs through a digital storefront on the site. Artists have complete pricing discretion, but Speakerheart takes $0.25 per song. Speakerheart's big differentiator, though, are the widgets (known as "Shelves") that offer streaming samples ("Speakers") and the ability for listeners to bookmark songs that they like ("Hearts"). Musicians and fans can place these Shelves on any site that accepts Flash, including MySpace pages. For artists, the idea is that users will be able to stumble across your music on a wide variety of sites, sample your music, then proceed to your storefront to buy a song or two.

The problem with Speakerheart and other digital distribution start-ups is a lack of critical mass. Artists with labels or a significant fanbase don't need the service--they can sell digital downloads through their own site or the label's site. In either case, they (or their label overlords) will keep a greater percentage of the sales price. That means that Speakerheart will continue to draw relatively obscure acts, which means that few listeners will have any reason to visit the site or place widgets on their personal pages, which will keep the service too obscure to draw any acts with a significant fanbase, and so on--a sort of obscurity death cycle. The only way to break this cycle would be for Speakerheart to get a few name-brand artists to place their songs with the service, but that requires big marketing bucks or a lot of luck (a formerly obscure Speakerheart artist becoming the next U2, for example).

The folks at Speakerheart might say "But look at other services that started with independent artists, like eMusic and CD Baby--if they can do it, why can't we?"

In the case of eMusic, the site had first-mover advantage: it's been around for almost 10 years (!), and has been able to sign up a lot of independent labels with rosters including multiple acts. With 2.8 million songs available, fans of independent music already know to look there, and new labels (or the aggregators that serve them, like The Orchard) strive to get their music placed there. With CD Baby, the service started by fulfilling a difficult role for most artists--online distribution of physical CDs, including packaging, shipping, tracking, payment processing, and so on--and only later expanded into a digital aggregator (placing its artists' music on services like iTunes) and direct digital distributor (selling MP3s on its own artist sites).

My point: if you're a beginning artist, I still think the best recipe for success is to give full downloadable samples away on your home page or MySpace, then sell your music through a service like CDBaby or TuneCore (another aggregator that resells your music through iTunes and other services). You've got to go where the people are.

Hip hop giants Public Enemy will release their next album via digital distributor TuneCore, according to a story in yesterday's New York Times.

As a musician who's recorded a lot of CDs with unsigned bands, I'm a longtime fan of CD Baby, which provides an online store for selling physical CDs, as well as digital distribution through iTunes and other online services. How do the services compare for digital distribution?

CD Baby charges a one-time $35 fee for each album you want to sell through them (digital or physical), and takes a 9% cut of each download. TuneCore charges about the same amount up-front (although it will vary depending on how many songs are on an album and how many stores you want to sell your music through), and charges an additional $20 per album per year. But they never take a cut of any sales.

If you're a relative unknown with a local fanbase and minimal tours, you might sell 100 tracks in a year. From each of those downloads, you'll probably earn about $0.60 of the $0.99 that most sites, including iTunes, charge. Sixty bucks. CD Baby takes 9%, leaving you with $54. TuneCore's always going to be better in that first year, as they let you keep the full $60.

But in the 2nd year, you'll pay TuneCore $20 per album regardless of whether it sells or not. Or you'll pay CD Baby 9% of your gross from digital sales. Assuming the $0.60 per download is accurate, the breakeven point is 370 downloads: that is, you will have to sell more than 370 downloads to do better with TuneCore than with CD Baby. For a name like Public Enemy, that's a no-brainer. For other unsigned bands--depends on whether you tour, whether your MySpace friends actually translate into paying customers, and so on.

If you're signed with a label, they've probably already covered digital distribution for you, and the contract says what the contract says.