amed after a gang of miscreants in a B movie and run by a woman (Bettina Richards) once profiled in the New York Times under the headline, “It’s Her Label and She’ll Sign Who She Wants To,” Thrill Jockey has always been rather left-of-center when it comes to catalogue and convictions. So last November’s industry-shaking move came as a surprise to very few.
Emulating other revolutionary labels, such as Warp and Kompakt, the Chicago-based Thrill Jockey launched its very own digital store. Stocked with MP3s from the label’s eclectic cabal of artists—from the jazzy servings of post-rock outfit the Sea and Cake, to the honky-tonk hymnal traipse of Freakwater, to the ever-fluctuating sound of Nobukazu Takemura—the shop offers digital albums at a cost of $10, with all MP3s encoded at 256 kilobytes per second. The cost includes jpegs of the album’s artwork, as well as liner notes.
“Our expectations with this were to provide another format option: CD, LP, and then MP3,” says Eric Keldsen, a sales and distribution representative for Thrill Jockey. “We recognized the place digital sales had in the marketplace. We’ve had our catalog with iTunes and eMusic for a long time, so we figured why not sell it from our site too? MP3s are obviously picking up speed and have been for a while, so we just want to make sure we can provide that option to customers as well.”
How, not if, to provide that option to buyers—that’s become the great digital music question for today’s independent labels.
Twenty-five years ago, the average independent head distressed over which distribution channels would best ensure product found its merry way to the mom and pop record stores. Today, such management vexing is reserved for the ever-changing digital landscape. Amid rampant file-swapping, ebbing compact disc sales (sales are down 15 percent this year from last), and the husks of failed business models, Thrill Jockey and countless other independent labels march onward, striving to unearth the ideal digital marketplace archetype.
According to the Independent Online Distribution Alliance (IODA), there are close to 150 music subscription and download services available, each with its own torrent of digital delivery methods. Of course, ensuring a catalogue’s reach and availability is top priority: “It’s just like the real world,” says Van Riker, responsible for marketing at the Seattle-based Barsuk. “You want your albums at as many record stores as possible.” But naturally, each services comes with its own tidy spreadsheet of pros and cons, and finding what works best for the bottom line is a stickling quandary.
Take Barsuk, for example. The label has a working relationship with iTunes, now the third largest music retailer period (over three billion songs sold since its launch in 2003), but even that service has its drawbacks: downloads free of digital rights management (DRM) restrictions and encoded at 256 kbps come at an additional cost. Barsuk once worked with MTV Networks’ URGE—a now defunct retailer thanks to a recent merger with RealNetworks’ Rhapsody (the joint venture is dubbed Rhapsody America)—but that service only sold WMA files, which are not playable on iPods. The label also avoids digital retailers that utilize subscriptions models. “We’re not big supporters of that particular type of approach,” Riker says, “so that forced us to go in another direction.”
That other direction means eschewing eMusic all together, a service that markets itself as the destination for independent labels, boasting over 300,000 subscribers and an estimated 4.5 million downloads each month. eMusic also offers MP3s that are DRM free, a much sought-after commodity by music consumers. Can you now start to appreciate the dilemma?
“As far as label philosophies intermingling with digital retail philosophies, it’s obviously hard to see eye-to-eye on all the issues,” says Christopher Welz, head of digital distribution and promotion at the Bloomington, Ind.-based Secretly Canadian. “Labels and artists tend to want the price of an MP3 to stay above a dollar, while most stores are looking to drive it down—to compete with iTunes or whoever.”
And that’s where digital music services and labels frequently don’t see eye to eye: track payouts. During a recent interview for Forbes, eMusic’s president and chief executive, David Pakman, detailed his service’s payout methods. Payouts are not a direct function of track list prices, but instead, based on revenue sharing arrangements. These are influenced by how often customers use up their subscription quotas. eMusic’s track payouts can range from 20 to 30 cents, compared to a retailer like iTunes, which often forks over 60 to 65 cents per track. This very pricing plan drove Chicago-based Victory to end its relationship with eMusic back in the spring.
“The decision to leave eMusic is understandable since what they pay per song / album is so much less than iTunes, FINA, Other Music, etc.,” says Keldsen. “The market is always changing and I think you’ll see labels pull out from certain sellers and then hopefully, those sellers changing their business models a bit.”
Curt Kentner, co-owner of Portland, Ore.-based Magic Marker, also understands Victory’s rational for ending its affiliation with eMusic, but couldn’t envision a scenario where his label did the same. “I can understand not wanting to share the cut with digital distributors or digital outlets. That’s their prerogative. Right now, I think it benefits our artists to be associated or to be in the same digital store as other better-known artists. As far as predicting if this is a move we might make, I would have to say no, I don’t think so. We don’t plan on isolating ourselves from the music community.”
Welz—who works with everyone from iTunes and eMusic to Other Music and Insound.com—understands a healthy digital music market needs a variety of business models. But he also stresses the importance of cultivating relationships with those digital services that share a label’s ideologies. Conduct business otherwise and one could end up severing ties with a distributor, much like Victory did.
“It’s a definite possibility that more labels will pull the plug on certain services if they continue to see PPD [price-per-download] go down,” he says. “We take eMusic very seriously. We have a great relationship with them, just like iTunes and other services. But in the end, I want to give our labels 100 percent flexibility with regard to content availability. SCD [which handles distribution for Secretly Canadian and various other independent labels] displays the options and opportunities, and the labels make the final call.”
For many independent labels, the journey into the digital realm is one wrought with uncertainty. That’s where industry intermediaries come into the picture. Magic Marker works with the Independent Online Distribution Alliance (IODA), a distribution and marketing company founded in 2003 that aims to see independent labels are represented in a market quickly being conquered by digital downloads (sales are up close to 49 percent from this year to last). Outfits like IODA and the Digital Rights Agency help small labels place their albums with music services, even aiding in negotiating royalty rates that might otherwise be impossible. Through IODA, Magic Marker’s catalogue is sold through services like iTunes and eMusic.
According to Curt Kentner, co-owner of Magic Marker, intermediaries like IODA are a necessary service in today’s market, especially if the brick-and-mortar downswing / digital shop upswing continues unchecked. Case in point: Amazon could be entering the digital market as early as this month, reportedly set to offer tracks from more than 12,000 record labels, all DRM-free; meanwhile, Tower Records, the biggest retailer in the U.S. to specialize in independent offerings, closed its 89 American stores.
“Right now, I feel safe in saying that the checks coming in from digital distribution each month are equaling if not surpassing our physical sales,” Kentner said. “Without digital distribution, I’m not sure releasing music would be feasible.”
Regardless of the technology, indies are delighted to finally be reaching a measureless audience—especially with ancient struggles to corral consumers still fresh in their minds. “The whole digital thing, while scary at times,” Hudson said, “is a really great opportunity for us to close the distance between the artists and the fans.”
“Digital distribution...while it is decreasing CD sales,” Kentner says, “it’s still amazing that anyone with an Internet connection can find your music in a digital store.”
For Keldsen and Thrill Jockey, starting up a label-run online shop was all about control. Thrill Jockey has thrived well with the established digital retailers—iTunes and particularly eMusic, where it ranks as one of that service’s top sellers—but running its own shop allows the label to sell MP3s on its own terms.
The most enterprising aspect of this entire venture? Thrill Jockey entreated other indie labels to hop on board and now peddles their catalogues as well: from fellow Midway labels like Carrot Top and Bloodshot, to Detroit’s Ersatz Studio, to Norway’s Rune Grammofon and Austria’s Mosz. These are labels that don’t feature downloadable MP3s on their own sites and frequently release hard-to-find physical product. Under the current arrangement, those on board with Thrill Jockey earn seven of the 10 dollars customers pay for a full album; Thrill Jockey gets the remaining three.
“We thought of bringing on smaller labels we loved that weren’t easy to find,” says Keldsen. “From there it has expanded and we are continuing to add labels every week.”
Thrill Jockey’s web site also offers on-demand streaming of entire albums, another progressive approach that has served to proselytize fellow independent labels. “Thirty seconds of a song isn’t enough,” said Rian Murphy, sales manager at the Chicago-based Drag City. “You definitely need more of the song to get a feel of what it’s like. You’re acting as a preview service, much like services such as Rhapsody. So streaming the entire song—that’s something other labels definitely need to look at.”
“We are generally of the same mind,” says Dean Hudson, director of technology and development at Seattle-based Sub Pop, which offers streams of individual songs on its site. “We don’t have huge budgets and as far as we’re concerned, we think we put out some pretty great records. In this case, our greatest marketing angle is letting people hear the music. Hopefully we’ve developed—and can develop—a great relationship with people who love the music, and they’re going to want to support what we do and buy the record.”
Besides on-demand streaming, what other directions will independent labels take? Interactive radio is one: like Yahoo! Music, which is utilized by labels such as Secretly Canadian. The service is akin to traditional radio, only users have the ability to skip songs, or rate tracks and artists to influence their experience. Many, however, believe the future will be more creative—Welz talks of concepts like ad-supported downloads, licensed peer-to-peer networks, and a more fractured digital landscape with niche shops like Beatport (which sells house, techno, and trance music) becoming more prevalent.
Already in place are arrangements such as the over-the-air music service hatched by AT&T and eMusic, where customers are able to use their cell phones to preview and purchase MP3s (all DRM-free and for the rate of $7.49 for five tracks). Secretly Canadian often prints download codes within LPs and CDs, so fans can pick up digital exclusives and copies of the albums they’ve just purchased at record shops. And Interscope made waves recently with its digital-only EP from TV on the Radio.
“We can’t be that far away from a day where music can be bought and then beamed to wherever you are—even your car,” says Murphy. “The accessibility is amazing.”
Welz also touches upon the relatively untapped potential in digital download packaging, where MP3s are purchased along with artwork and liner notes, giving fans the ability to enjoy music in a mutated form of how individuals once listened and perused LP jackets.
“I think we’ve already got a small glimpse into the future with iTunes digital booklets and flash-enhanced digital artwork,” he says. “While it’s not for everybody just yet, I think heads are starting to turn. The back-end will always be digital files, but the front-end has a lot of potential. I think labels get along best with those retailers that maintain creative digital stores—places that think of creative ways to sell digital music other than simply lowering the price per download.”
Bob Lefsetz, on his popular music business blog, The Lefsetz Letter, recently wrote, “The music industry is based on greed and nobody is tech savvy enough to understand where it’s going.” There is currently no panacea for today’s lagging industry, but those affiliated with independents certainly possess the creativity and efficacy to unearth it.
Ignoring the precedent set by the major labels and embracing the technology was the first proper step—a move reminiscent of indie giant Rough Trade issuing 1981’s landmark C81 cassette compilation, at a time when the major labels were maligning the format for its alleged effect on album sales. “I’ve noticed that newer and younger labels adapt and coordinate to new media much quicker than the elders,” Welz says. “It’s very much like watching kids play video games while their parents stand behind, perplexed and uncoordinated.”
And while there does exist the occasional lament over where the industry is going (“I just I wish iTunes, and digital distribution in general, was able to provide a more tactile experience,” Hudson says), all fully realize there’s a choke-on-the-dust fate for those who are too rigid. Tinkering with new business models, remaining revolutionary and not reactionary, never forgetting founding tenets—that’s how today’s independents will thrive in a furiously developing, liquid digital market.
“We’ve been pretty happy with the results,” Hudson says, “but it’s so hard to say what’s right and what’s wrong these days. Right now, I feel like we’re mostly just interested in making the music available to the people who want to buy it, so long as it’s in a way that doesn’t cheapen the music, the artist’s craft, or the experience for the fans.”