Moving Units Online - EMusician

Moving Units Online

Proof of the Internet's potential to revolutionize the music industry is evident: Web-savvy musicians are madly setting up sites to promote and sell their
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Proof of the Internet's potential to revolutionize the music industry is evident: Web-savvy musicians are madly setting up sites to promote and sell their material, and major labels are scrambling to keep up with the changing times. The Internet has the power to disseminate music worldwide without the hassle of going through traditional brick-and-mortar distribution channels (that is, major labels). But figuring out how to develop the infrastructure necessary to get your music to consumers and generate profit (or at least break even) through the Internet is not a simple matter.

Selling product online is not as easy as it might sound, especially if you, like most independent musicians, are on a shoestring budget. Business banking, credit card processing, and setting up a merchant account require time and money. Getting enough people to visit your site on a regular basis and buy directly from you is another ordeal altogether. Major labels have the advertising dollars to lure potential customers and the budget to build business structures such as collections departments for bounced checks, secured credit transactions systems, order-fulfillment houses, and so on. Very few independent musicians have access to those kinds of resources.

Nevertheless, an indie can make an online impact similar in scope to that of a major. To do so, you need to understand the workings of online business, specifically of Internet music retailers.

RETAIL LOCATIONS NEAR YOUThink of an Internet music retailer as a neighborhood record store with the whole world as its neighborhood. There are big virtual record stores, small mom-and-pop sites, and a variety of permutations (see the sidebar "On the Retail Trail"). With new music retail sites popping up almost every day, it's impossible to cover all of them. We'll profile the ones we've had experience with and others that have a good reputation. Before you give your product to any Internet retailer, be sure to check its reputation and find out how long it has been in business. If the company makes you uncomfortable, seems to have too much red tape, or wants you to sign contracts, move on. All the companies we discuss here are nonexclusive.

Amazon.com is a major online retailer with a great reputation. It carries independent releases right alongside major-label releases and reports having 10.7 million customers in 160 countries. The company has a program called Amazon.com Advantage (www.amazon.com/advantage/music), which is specifically geared toward independent artists. The program is completely free: it has no listening fees, CD storage fees, or anything. You can have a description of your music, any reviews you've received, along with your cover art, liner notes, bio, and three 30-second sound clips posted on the Amazon site. The only prerequisite is that you have a UPC bar code, which is standard for all the big online retailers.

The company takes 55 percent of every sale, so if your CD lists for $12.99, your net is $5.85. Although you set your price (in dollar increments from $8.99 to $22.99), Amazon reserves the right to discount it. However, even if Amazon does choose to discount your CD, you will still receive a 45 percent cut of its original list price. Amazon mails out checks once a month. Members of the Amazon.com Advantage program have access to password-protected reports that detail how their titles are selling and how much money they have made. Also, sales rankings for all of Amazon's titles are posted on the site.

Amazon recently implemented its New Music Spotlight, which appears in the Free Digital Downloads area of the site. The New Music Spotlight features full-length MP3 files by independent artists. Amazon's editorial staff chooses the songs that are featured, and new artists are added frequently. "Our Free Digital Downloads area was launched in June, but until now it has focused mainly on big-name artists from major labels," says Amazon's product manager for music, Greg Hart. "Now, with the New Music Spotlight, music fans can also discover independent artists they would normally never come across. It's a great way for customers to check out new music."

CD Baby is a relative newcomer but is already highly regarded (www.cdbaby.com). A mom-and-pop site, it was started almost two years ago by Derek Silvers and caters exclusively to independents. The site currently has about 700 artists and adds about 30 new artists every week. "CD Baby is the kind of store that's a musician's dream, the kind of place I wished existed when I released my first CD," says Silvers. Pay a one-time setup fee of $35, and Silvers will scan your artwork, digitize your music, and create a CD Baby Web page for you. The fee covers up to four tracks; additional tracks cost $10. Your cover art will also appear in the virtual record bins for those folks who are just browsing (see Fig. 1). CD Baby has no prerequisites for joining; you don't need a bar code or even shrink-wrapped CDs. The company takes a flat fee of $4 from every sale and never sells advertising space on its site. You set your own price (most CDs on the site are priced at around $10), and when a CD sells, you receive an e-mail message with the customer's contact information. This feature is invaluable for compiling your band's mailing list. Silvers is also always on top of his catalog, and will recommend appropriate artists to film and TV music directors when they call.

An alternative to the more traditional retail structures is CD Street (www.cdstreet.com). This company is essentially a fulfillment house, providing a merchant account and a secure credit transaction system. An icon on your Web site links customers to CD Street's transaction page. Once an order has been placed, the company processes it and ships the CD. (If you prefer, you can ship the CD yourself.) The customer is billed for shipping and any applicable taxes. CD Street has no setup fees or other prerequisites for its service. The company takes 15 percent of every CD sale. Its commission is low, which translates to more net profit per CD for the musician, but it is not a retail store and does nothing to generate traffic, so your CD won't be automatically exposed to the music-buying public as it would be on an actual retail site.

Another alternative to regular retail sites is the MP3 site (www.mp3.com). It lets you sell your music via a DAM CD, which is a CD-R with tracks in MP3 and audio file formats. Listeners pop the CD-R into their computers to listen to the MP3 files, transfer them to their portable MP3 player, or listen to the audio files on their compact disc player. For every DAM CD you sell, MP3.com splits the revenue 50/50. This commission may seem high, but consider the fact that you don't pay for anything else. It's free to join, and all you have to do is send your audio tracks; MP3.com burns and mails the CD-R. You can set your own price ($4.99 to $9.99) and choose the genre from hundreds of categories. Furthermore, on the MP3 site you get a page dedicated to your songs, which you can link to your own Web site. The top ten selling DAM CDs are listed weekly, as are the most downloaded singles. Because the MP3 site gets thousands of hits every day, involving yourself with this company is a great way to increase your exposure.

Haven't manufactured a CD yet? Not a problem-you can still sell your material on MP3. Convert your songs to the MP3 format and upload them to the site. (Visit the MP3 site for information on how to do this.)

An important point to note is that if you want to sell DAM CDs through MP3, the company requires you to post at least one free MP3 track on its site. Don't worry-giving up a track won't eat into your sales. First of all, MP3 files aren't CD-quality audio. Second, you don't have to give away tracks that are on your actual CD. In fact, many artists use the DAM CDs as a platform for remixes, live performances, songs that didn't make it onto their retail CD, and sometimes even demos (great for die-hard fans). It's a good idea to offer at least three free MP3 tracks. Rotate them by replacing the oldest song with a new one every month. This way, folks can download several tracks and get a real feel for your music. If listeners like what they hear, they might link to your site to purchase your CD. Or if they don't buy the retail CD, they still might buy the DAM CD on the MP3 site. Either way, you can't lose: another set of ears has heard your tunes.

THE BIG SETUPThe three keys to online sales are options, links, and hits. If you have these elements in place, old fans will find you, new fans will discover you, and with a little luck, you should see some national and international sales.

With e-commerce still so new, customers need to have the option of buying goods through the channels they feel most comfortable using, so you should give them a choice of where to purchase your CD. Provide links on your Web site to more than one retail location (see Fig. 2). Customers might not feel at ease sending you a check or ordering through the mom-and-pop site where they found you, so make sure at least one of the major music retailers carries your product. Having a variety of purchase points increases the odds of making a sale and being seen.

It's been said before, but it bears repeating: links are crucial for generating traffic. The more links you have out there, the better. Make sure that the retail locations you work with provide links to your site. That way, no matter where somebody discovers your CD, that person always has a way to get to your site for more information and other ways to buy product. Hook up with other independents and trade links. If you align yourself with artists or organizations working in similar genres, chances are good that folks visiting those sites will also visit yours. Links have a cumulative effect, so keep pursuing them. Well-placed links help people distinguish you from all the other musicians on the Net by associating you with sites that people already know and like.

Hits are only as good as the sales they generate. Even though big retailers get a lot of hits, these hits do not guarantee sales. People need to hear your music, be assured that the CD isn't a lemon (something consumers are especially wary of with independents), and get excited about the music before they make the purchase. Real Audio lets people hear your tracks almost instantaneously, but its sound quality is less than astounding. One solution to this problem is to give some tracks away as MP3 files at the MP3 site (see Fig. 3), as we mentioned earlier. This lets folks hear your music with much better sonic clarity and listen to it at their leisure.

HIGH RISK, HIGH REWARDSo far, online sales figures for independents have been very modest. Don't expect to sell thousands of units right away. Silvers says that CD Baby averages about 350 sales per week. That means only about half of the 700 artists in the company's catalog are selling their CDs. One explanation is that purchasing music on the Net is still in its infancy, but the prevailing reason is that, more often than not, people just don't know about new independent releases. This topic is too vast to discuss here, but as Silvers points out, "The top sellers at CD Baby sell a lot largely because they play out live." The connection between people who see an act in concert and people who buy the act's CD online is strong, so don't ignore it.

An example of a CD that is selling quite well online is One from Fisher (www.digitalsound.net). Ron Wasserman, who produced and cowrote the songs on One, explains that they are aggressively marketing online using links, banners, reviews, MP3, and anything else they can think of. He was kind enough to give us a sales breakdown for a two-week period in May. Out of 363 CDs sold, 170 were sold through Internet music retailers (40 through CD Street, 30 through CD Baby, and 100 through Amazon), 40 via word of mouth, 30 at local "real-world" retail stores, and 123 by check or money order. (Mailing a check is still a popular way of buying goods despite improved security of online credit card transactions.) These are great figures for an indie; most report far less.

Halley DeVestern's release, Sugar Free (www.tnom.com/halley), is being offered on MP3, CD Baby, Amazon, and Harmony Ridge (a site exclusively for indie female artists). DeVestern says she is excited about being part of sites such as MP3 and Harmony Ridge, but she stresses the importance of being with a major retailer as well. "Being on a site like Amazon makes you look legit," she explains. "People will go with the safety and name recognition it has rather than buy from a site they've never heard of." Offering a free single on MP3, she reveals, "is great because I can see exactly how many downloads I've had." Scott Meldrum (www.crushwerx.com), another MP3 artist, concurs. MP3 singles from his debut CD, Crush, have seen more than 30,159 downloads. His sales figures for the second quarter of this year, with more than 145 DAM CDs and 502 retail CDs sold, prove that offering free MP3 files works.

UP IN VIRTUAL ARMSThe Internet now allows indies to stand toe to toe with major labels. However, independents must understand how to use and develop the distribution channels that are evolving in order to have a fighting chance of survival, let alone success. They have to be proactive and aggressive in their involvement with online music retailers, customers, and new audio formats to show that they can produce quality product and sizable revenues. This is the only way to grab a big enough piece of the market to stay on a par with the majors, because the majors will soon come thundering on the scene, waving their fat wallets and proprietary technologies (like digital copy protection and music tracking systems). If indies can create online support systems and business structures, they won't be so easily brushed aside.

Lygia Ferra is a songwriter/producer whose first independent release as a solo artist is in its final stages. The album, Strange Peculiar, is slated to hit retail stores before the end of the year. For more information, visit her Web site, www.lygiaferra.com. Erik Hawkins is a musician/producer working in Los Angeles County and the San Francisco Bay Area. You can check out his fledgling indie label at www.muzicali.com.

Listed below are some of the Internet retail sites we have discussed here, and some that are not mentioned but are certainly worth checking out.

Major Retail Siteswww.amazon.com/advantage/musicwww.theorchard.comwww.cdnow.com

Mom-and-Pop Siteswww.cdbaby.comwww.lama.comwww.tweekitten.com

Just for the Ladieswww.rahul.net/hrmusicwww.ladyslipper.org

None of the Abovewww.mp3.comwww.amp3.comwww.cdstreet.com