April 8, 2014
Starting as an online retail store dedicated to serve independent musicians in 1998, CD Baby has grown to become a legitimate force in helping independent artists sell their music online and in retail outlets around the world, through sync opportunities, publishing and via YouTube play. Dir./Marketing Kevin Breuner offers his perspective on prospering in the new digital world order
What were you doing before CD Baby and what made you decide to join the company?
Back in the day I was an artist in a band called Smalltown Poets. We signed to a major label, toured professionally and released a few records. I left that situation in 2000 because I thought there was a better way to pursue a music career, where at the end of the day, I still had money and some ownership in what we were doing, so I started pursuing music independently with various projects. I was living in Portland at the time and I came across CD Baby, which was distributing indie music. I started by using them; I ended up getting a job here. I've been working here for over eight years.
Was there a point in time you knew that CD Baby had finally established a firm foothold in online indie retail - and if so, when was it?
I knew that before I started working here, when I came across CD Baby in 2003. People were already referencing it as one of the poster children for the disruption of the music biz, in that the Net was going to change the music biz and the traditional gatekeepers were no longer needed, or their role was changing to the point where they could no longer dictate who had access to the market. That happened before I started here. In 2004, CD Baby started distributing its artists' music to iTunes; it was the first company to distribute indie music to iTunes. That was a big turning point in the industry shifting, with people having access to the market through the change to digital and new technology. To a lot of people in the indie artist community, CD Baby was leading the forefront of that. As opposed to being scared of digital technology, we were diving right in. We knew where the business was going, so when you look at where we're at today, it's no surprise. From there, we've grown into a lot of new things, helping artists do more to monetize their music, be it on YouTube or micro-sync opportunities, licensing opportunities and publishing ... helping them get a lot of money they couldn't previously get access to. And the opportunities are still growing.
Outside of getting indie artist tracks on iTunes for sale, what other kind of benefits does CD Baby provide artists, in terms of promotion and marketing?
We're a lot more than just getting music on iTunes and Spotify. From the beginning, we had our own retail store that sold CDs; now we sell CDs and downloads. We still have a CD sales component; even though the CD has been in decline, our CD sales are up 15% because we expanded out with deals with Alliance, which is one of the largest physical distributors, to get our records in stores. We're also improving our catalog and have gotten it on Amazon.com. We found lots of opportunities for our artists in arenas far outside of the digital distributors. We just launched ads on CD Baby where an artist can create simple banner ads targeted at music fans of certain genres to help them to promote their music.
CD Baby sponsored an SXSW live showcase this year. Will you be doing other ones across the country too?
We've done some showcases at music fests in the Northwest, such as the PDX Pop Now! Fest in Portland, but outside of that, SXSW is the only place where we've done live showcases. There aren't many events where it would make sense for us to have a showcase. It doesn't make sense to focus our efforts on old business models. For instance, we currently have around 325,000 artists using CD Baby. To go out on tour to help three or four artists costs a lot of money; which wouldn't help our music community at large. Our mission is to help as many indie artists sell as much of their music as possible. As much as we want to showcase our artists, doing a tour would be very costly and not the best use of our time and resources.
In fact, the main benefit of us doing SXSW is that people from YouTube, iTunes and other partner companies are there; we get to expose our bands to people from the media and other companies and we get a chance to give them a better understanding of the catalog we have.
Discuss your sync efforts.
We work with a partner company, Rumblefish, and their focus is to help us get micro-syncs. Basically, there is so much consumer usage of music today. YouTube is just one place where people upload videos they've created of their favorite bands' songs. When they put it on there, we monetize that. Other places are doing similar things. There are numerous apps out there that have our catalog in them, so if someone shoots a video to post on a social network, they can choose songs from the CD Baby catalog and post them on websites and all sorts of places. It's not a Hollywood film/consumer-type activity so the income isn't on par with a sync for a Hollywood production, but at same time, millions of people are creating content online. We want to tap into that market as opposed to just pitching a couple tracks to music supervisors who need specific things. We're also involved with in-store audio syncs; there are a number of opportunities like that.
All Access posted a new story recently where a study found that labels made more money off of fan-created videos of bands' music than the labels' own videos. Have you seen that to be the case for your indie artists on YouTube?
I don't have the exact breakdown, but I would say that's probably the case for us as well. One of the ways we can help our artists monetize those videos is to encourage fans to make them; we want that kind of activity. In the past, the music business at large was scared of what fans did with their content, but YouTube is a great way to make more money from fans who love your artists' music and who promote it by using it in their videos. Instead of making them the villains, you can monetize their efforts by essentially letting them become your marketing department.
What kind of money are we talking about?
Our sync efforts on YouTube and other sites have been ongoing for 18 months, and so far we've paid $1.2 million to artists. The exact individual amounts depend on what artists' songs are interacting with YouTube fans. We encourage their activities, and our top earners have made tens of thousands of dollars off YouTube. That's real money. I know artists who are making more and have been doing it longer. They've been monetizing YouTube to the point where they're pursuing it as a full-time living. Their own YouTube channel is their main focus; it's almost all they do. They don't bother touring or even selling music. As opposed to traditional artists who make an album, tour, and do the support thing, these artists' only expense is creating music and videos for their channels and encouraging others to make their own.
Does CD Baby promote its artists to radio?
We typically don't get into radio. That's such a specialized area. It has not been advantageous for us to get indie tracks on the radio. At some point, it might make sense for us to do more in that area, but currently there are better ways to spend our efforts that help our artists by creating new or better tools to promote their music.
How has the rise of streaming services impacted CD Baby?
The interesting thing is that we're starting collect a lot of revenue from Spotify just as digital download sales has taken a slight dip. That decline has pretty much been offset by the amount of money coming in from Spotify. The growth in Spotify revenue has been pretty dramatic.
Where does Pandora fit into your mix?
We don't distribute to Pandora. It's not a streaming service but an Internet radio company. Pandora is non-interactive and treated like traditional radio; you have to submit music directly to them ... and they pay performance royalties. Spotify is an interactive streaming service, so the payout to artists is different.
We have a strong relationship with Spotify; we send them artists to feature throughout the service. We're always looking for ways to work closer with our partners. At the end of the day, it's just one type of service. At CD Baby, it's all about maximizing potential of our artists across the board. Spotify does its thing; we do what we can to keep all of those relationships going and we make sure our artists know what's going on.
Many artists have complained that the money they receive from streaming services have been peanuts. What's your take?
That's a huge can or worms to open there. You have to take Pandora out of that equation because they're governed by different laws. One problem is that most artists lump them together and assume the same thing, that Pandora pays royalties like radio stations, and that they don't get paid enough for x number of plays, compared to the same number of plays on broadcast radio. But then you look at the royalty compared to the number of listeners each attracts to the same song, Pandora pays more.
When it comes to streaming services, I also wish they paid more, but this is a business ... and even Spotify is not making money. For now, it's being run on venture capital. Ideally, I hope we can create an ecosystem where everyone involved can prosper, where the companies can make enough to stay in business and the artists can earn enough to make a decent living. We're really interested in the launch of Beats Music, which is trying to create a more transparent industry that's fair to artists.
Do you feel Beats Music will succeed?
At this point, it's too soon to tell how it'll shake out. They launched two months ago. Our catalog is in their store; we'll see what happens in the next six months.
What's your take on iTunes Radio? There are already studies that suggest that iTunes Radio users don't buy records off it because it's mainly used as a music player.
It's different in that it's more like Pandora than Spotify. Unless iTunes releases numbers that tell how it impacted sales, we have to rely on a few articles and a lot of speculation. What record companies need to realize is that just because you make something with the capability for instant sales doesn't mean people will use it use that way. You can't push for everyone to do business on the same format in an era where there are lots of different formats. Some people swear by purchasing downloads; others prefer Pandora or Spotify, and I bet some people will want something like PONO, which offers a totally different high-resolution experience. We have to make the economics work however the people want to listen to music.
And what will become of CD Baby if more consumers treat music more of an access than as a possession?
The buying of music is just one aspect of our business. Things like YouTube monetization and even publishing royalties are taking hold. Two years ago, it was impossible for an indie artist to tap into additional royalties that can be generated in a world that wasn't connected. In the pre-digital world, nobody was interested in putting together a team to find royalties that we now know we can get. CD Baby has become a publishing administrator for these folks; we go out around the world and collect all the foreign performance and mechanical royalties that's been sitting there. It used to be very difficult for indie artists to get paid in foreign territories, where retail stores hold back mechanical royalties for songwriters.
I assume we'll see more of a shift to the publishing side of things under user-generated content and those aspects of how music is monetized. But as much as syncs and YouTube-created content generate a lot of revenue, people are still buying downloads by the millions ... and they still buy CDs. Whatever way there is to make money off of music, we'll be there to help our artists in the future.