Bandcamp; how the online world has changed how music is released in the 21st century

Introduction

2008 was the year that saw the iTunes store become the largest music retailer in the USA, selling over four billion recordings, to fifty million customers, from a library of over six million songs (Apple, 2015). Although this success has helped claw back some of the revenue lost through illegal file-sharing, it has rendered many of the older business models favoured by major record labels redundant. In 2015, outside developers like iTunes and Amazon dictate the price points of recorded music sales in the on-line world, and the hangover of piracy now means there is a difficulty in getting people to pay for music at all (Harrison, 2014, p. 184).

One way that artists are taking matters back into their own hands is through “direct to fan” services that cut-out traditional record label deals, and allow artists to sell music direct to their fan base. The artist can dictate the price-points themselves and then make digital music and/or physical products/merchandise available online on specific websites. The most prominent of these platforms is Bandcamp according to Wiksteed Reports (2015); “Consider the service offered by Bandcamp as a benchmark for feature-rich DIY/self-serve platforms.”

This report will look into the various positive and negative aspects of the direct to fan business model, using Bandcamp as the main focus, and suggest what ways it could improve its services to both creators and consumers of music. It will also look to assess the viability of this business model in an attempt to decipher its place in the contemporary music market.

A Brief History & Bandcamp Today

Bandcamp was started in January of the same year that iTunes became the biggest music retailer in the USA, as part of a solution to the problem for new and unsigned artists creating their own website. Online music streaming players were hard to include on websites in 2008 and Bandcamp founder Joe Holt decided that this was a problem that needed solving. Holt’s (2008) goal was to “Try to let musicians explore new business models themselves” so that artists could have the ability to sell their music online independently, but hosted through Bandcamp’s servers.

Bandcamp (2015) has the tools for artists to sell recorded music, merchandise, physical releases on any format and just about anything else the artist can think of at the price they choose. Because of this level of freedom, the site has gone from strength to strength and has been highly praised by Emily White (2014) “what Bandcamp is doing makes the most sense for fans, artists and the industry at large with regard to modern music releases“.

The successes of the site can be seen clearly when Burton (2015) stated that in 7 years of business, Bandcamp has paid out over $100m to artists, averages 16,000 album sales every day and pays the vast majority of their $3.5m monthly revenue straight back to the musicians hosting content on their site.The site itself takes a 15% commission on each sale which drops down to a 10% commission once an account has hit $5,000 in overall sales. The site is mainly for niche and independent artists though small labels have set-up pages for their acts as well. This is because the site and orders are fulfilled by the artists/labels themselves, which gives the service a community feel, but this may not be viable for larger artists or labels according to Wiksteed Reports (2015).

Along with a recently introduced mobile phone application for fans, the next stage of development for Bandcamp is to offer artist specific streaming services. Consumers will be able to subscribe to an act and be given access to their back-catalogue of content, merchandise discounts and exclusive unreleased material. All of this will be at the artist’s discretion because, as Bandcamp CEO Ethan Diamond (2014) stated; “We want Bandcamp to be an important part of how any artist develops a sustainable career, and subscriptions can be a big part of that.”

The direct to fan market place

One of the other significant players in the direct to fan market place is Music Glue, another site set-up as a reaction to the post-Napster era music industry, though their philosophy on recorded music revenue did differ somewhat to Bandcamp’s when it started. Mark Meharry (2009), Music Glue’s founder, stated that “music is moving away from being a retail product – to what we refer to as ‘content’. And content is not necessarily something you sell”. This philosophy has since been adapted though as they now offer digital music to be sold on their site in the same way as Bandcamp does. Music Glue’s (2015) service is also slightly less expensive than Bandcamp’s, as they only ever take 10% of any sale. Bandcamp takes (2015) 15% of every sale until an artist hits $5,000 in overall revenues, then they then decrease their cut to 10% of further sales.

Music Glue has been endorsed by acts the size of Mumford & Sons, who have used the service to sell concert tickets. This was to bypass the secondary ticketing market that is damaging the live music industry and sell direct to fans, in order to avoid tickets being resold by third parties at overly inflated prices on a non-regulated free market (Reynolds, 2012, p.132)

Another alternative to Bandcamp is a service called Topspin (2015) that has worked with Pixies, Tyler the Creator and Interpol in their campaigns. The service provided by Topspin is subscription based with no free tier and a minimum commitment of $9.99 a month going up to $49.99 depending on requirements. Because of this, the platform is more suited to established artists where bespoke sales, marketing and ticketing can be collated together in an interface that is tailored to specific artists.

It is easy to see why more established acts are choosing to go down the route of direct to fan services to interact with their fan-bases when looking at the potential to be made from CD sales through this platform. A CD sold direct to a fan through a bands website, Bandcamp/Music Glue page, or Topspin bespoke sales solution could earn up to ten times more than one sold under a traditional label deal (Riches, 2012, p 193).

The premise of direct to fan services has come under criticism though, as some believe that it is only the artists that already have a significant following will be able to use the technology to its full potential. Berger (2013) believes that “without a very consistent fanbase, a serious work team and a strong marketing and media broadcasting basis, things won’t get very far.” Perhaps the main goal for direct to fan services is to bridge this gap and develop effective tools to further an artists reach, not just enable them to shout louder to those already listening.

Aggregators and Streaming services

One of the downsides to the direct to fan approach is that it ignores the need to have music available for purchase/streaming on the sites of major retailers like Amazon, iTunes and Spotify. For independent artists to place music on sites like these, they need to go through a third party service called an aggregator. CD Baby for example, communicates with the retailers on the artist’s behalf and accounts to them in exchange for a fee for their services. The service it provides has been touted as “the grandfather of all online toolsets for music artists” (Baskerville and Baskerville, 2013, p. 411).

CD Baby (2015) also offers the ability to press artist’s CDs for them and the options are there to add customisable store fronts on web pages and social media sites. CD Baby then accounts to the artist weekly as items are sold/streamed through every site they are available on. This could be seen as an advantage over Bandcamp’s services as all the revenue is kept in one place and physical items can be manufactured and distributed through this service.

The cut CD Baby takes is far less than a record label and the music is distributed to all of the same places. On the other hand, figures show that an unsigned artist has the potential to earn more through Bandcamp’s platform than CD Baby, as the 33% royalty cut CD Baby takes is double that of Bandcamp’s initial 15% cut of an acts sales up to $5,000. Bandcamp then reduces their cut to 10% after an act hits $5,000 in revenue, which means CD Baby’s services end up costing over three times the amount of Bandcamps. (Information is Beautiful, 2015).

All of these services offer alternatives to musicians that would rather not or have not been offered the chance to sign a record deal, but just because they are alternatives, does not necessarily mean that they are the way forward. Industry mogul Simon Napier Bell (2014) told Music Week “The thing is [independents] do need the marketing corporations… if you look at the Top 20 charts on both sides of the Atlantic, it’s all major record companies. They’re not dying.”

This is further backed up by the IFPI (2015) report on digital music which found that the 10 largest selling acts of 2014 were signed to labels owned by one of the three major record labels; Sony, Warner or Universal. The IFPI (2014) also found in their investing in music report that it costs between $500,000-$2,000,000 to break a new act in a major market and that more than $20billion was spent by record labels on A&R and marketing artists between 2009 and 2013. If this is the true cost of global success, it is no wonder that major labels have a firm grip on the upper echelons of the industry. An independent artist is unlikely to have huge funding to kick-start their early career and this is why the direct to fan model has not resulted in a paradigm shift, where every independent artist can become instantly successful (Spitz, 2013).

Crowdfunding

One of the ways a new or established artist can bridge this funding gap in the run up to a new release campaign is by approaching a crowdfunding site like Kickstarter or Pledge Music. Pledge Music identified a revenue gap that was also highlighted in a Nielsen Soundscan report. The report found that there were 6 different types of music consumer and that the industry was losing up to $2.6billion by not servicing the most passionate of those consumers (Peoples 2013). Pledge Music allows fans to be involved in the process of making an album, by funding it before it is released, and are then given access to exclusive content in return. Pledge Music’s CEO Benji Rogers (2013) believes it empowers fans to “have your super fan experience here [Pledge Music]” and that it goes someway to meet the demand not met by the industry. The service allows fans to pledge however much they want and provides the tools for artists to monetise anything from a private party with fans, limited edition merchandise or just simply a digital pre-order of the new release (Rogers, 2013).

Pledge Music’s services are specific to the music industry and are therefore tailored to suit musicians but Kickstarter’s services vary slightly and are open to film and tech companies as well. One of Kickstarter’s music success stories was Amanda Palmer, who used the service to fund the release of a solo album and reached $1.2million (Lindvall, 2012). On the other hand, there is also Bjork’s failure using Kickstarter to try and convert her innovative Biophillia application album for Android and Windows platforms. The project aimed for £375K in 30 days but was taken down from the site after just £15.4k was raised in 10 days, only 4.1% of the goal (Dredge, 2013).

The Bjork story is particularly interesting as one of the main criticisms that has been levelled by Berger (2013) at the direct to fan platform is that it will only work with established artists that already have a fan base, which Bjork certainly is. The money was for a conversion of an already existing product to another format for educational purposes and so is a process that may have less fan interaction than the making of an entirely new album. This example instead suggests that it is artists that use the platforms in a relevant way that engages fans or potential fans on a personal level that will get the most out of the direct to fan area. This idea echoes Wikstrom’s theory of creativity as consumption that suggests artists need to be more able to respond to their fans creative desires. By doing this, artists can turn “the fans creativity into their own consumer proposition… build a business with low churn and high average revenue per user” (Wikstrom, 2013, p.179). The tools that direct to fan services offer allow this creative consumption method to flourish, and is something that could be embraced by acts of all sizes in the future.

Where is there room to improve at Bandcamp?

Brian Solis puts forward the idea that it is no longer content that is king but it is instead the context that we consume it in. He states that “we must invest in the calibre of our relationships as well as the calibre of the content we consume, create and share. The answer to what consumers value lies in context” (Solis, 2011, p.35). Although this is true of the general public, the services that direct to fan sites provide mean that it is the artist that is defined as the consumer, as they are the ones giving a percentage away to the platform.

This is why the context part of Solis’s ideology is so important, because all the direct to fan providers are giving artists is the “context” in which the artist can sell and distribute their “content” to fans. If Bandcamp can ensure that the window they give into an artist’s world is more transparent than any other service then it will thrive. Ethan Diamond (2014) told the Guardian; “We’re trying to create a channel for artists and their biggest fans where they aren’t having to compete with the other things”. By becoming the best way for fans to interact with artists, by making sure the relationships between the two are strongest on Bandcamp’s platforms, it can ensure that the artist is getting the best available platform to display their content.

The issue that this does not address however, is the problem of direct to fan favouring larger artists with already existing fanbases gained through traditional marketing approaches. Rapper Ryan Leslie (2014) is in the process of creating what he calls “the first direct-to-consumer record label” which aims to solve this problem. Leslie was signed to Motown in 2008 but the royalties from 180,000 album sales didn’t cover his $100,000 advance, yet his self-released album sold 12,000 copies and brought in $160,000 in revenue. This is why he hopes to create a label that would provide small marketing advances for independent musicians with an app filled with massive amounts of data-collection and interpretation tools, in return for a 20% stake in their revenue (Holmes, 2014).

Leslie’s story proves the theory put forward by Passman (2012) idea that ”For a record deal to make sense, the record company has to generate more money for you (after they take their piece) than you would get by selling less product on your own” and although it is not a final solution, it is an interesting premise. This could be used as inspiration for Bandcamp to partner up directly with a music marketing specialist like Essential Music Marketing who work with labels such as Innovative Leisure, Cooking Vinyl and Fatcat Records (Essential-Music, 2015). This way Bandcamp could offer a premium service for acts (similar to Topspin’s services) and could seek to break acts into larger markets whilst letting artists retain all of their rights. As a way to help artists with upfront cost of this service, the marketing choices would be as tailored to the artist as the website platform they provide. Acts would be able to choose how they paid for the marketing costs; it could be as an advance against future earnings, as a higher royalty percentage taken on sales for a given period of time, or even as a reward for significant sales figures if a particular artist is utilising the tools given to them effectively.

Conclusion

Global recorded music industry revenues fell to under $15billion for the first time in history in 2014 as a result of a decline in both physical and digital sales (IFPI, 2015). This fact makes the findings of the Nielsen Soundscan report that there is up to $2.6billion being lost by not servicing music consumers in the most effective ways even more relevant (Peoples 2013). Direct-to-Fan services allow artists to adapt their pricing strategies in ways tailor-made for their fan base. Arguably, this is a service that labels cannot offer, as they are effectively a middle man between the artist and the consumer. The way that services like Bandcamp and Music Glue are breaking down the barriers put up by record companies is an area of much debate and one that still needs much exploration. This is because major record labels investing in marketing campaigns from deep pockets is still currently the way to grow acts on a large scale to a mainstream audience. However, if the services that direct-to-fan platforms provide can find a way to turn their artist’s revenue generation into marketing spend, or partner with people that can do it for them, then the shift in paradigm that was initially promised by the music press may yet happen (Berger, 2013).

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