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Stumbleuponithinkmusic: "less people are going to be making money out of music as middle men" · Jul 16, 03:42 PM
We’ve been doing some research so we can update our article on different digital download stores, and have been checking out ithinkmusic. ithinkmusic provides a way for record labels to sell directly to fans by building their own store – cutting out distributors and retailers – and lets them keep 95% of revenue. The ithinkmusic model doesn’t fit neatly into a comparison of different download stores because it’s a technology, rather than a store in its own right, so we decided to give it its own seperate post.
Using a service like ithinkmusic to build a DIY store could be an interesting alternative to selling through other retailers. Both models have pros and cons, and a combination of the two could be the best option for some labels. If you have your own retail store, you’re completely reliant on attracting customers to the store yourself; it means a much higher revenue share, but unless the customers are there, it’s going to be a high share of few sales. The DIY option goes hand in hand with good promotion. Established stores can offer marketing support, especially for exclusives, as well as a large user base, meaning your music will probably reach more people, but the tradeoff is a lower percentage.
A combination of the two means you can benefit from reaching a community of customers that are going to be browsing for similar music through a retailer, and you can also direct fans from your mailing list / MySpace to your own store, where you can make more money. Worth considering?
Michael Cassidy, the person responsible for the development team working on ithinkmusic, was kind enough to chat to us, explaining what the service does, and what it can offer to labels and bands. You can read a transcript of the interview below…
Hi Michael, could you start off by explaining what ithinkmusic is and how the model works?
ithinkmusic is a platform that independent record labels can use to create their own download store. So, rather than acting as a retailer that stocks music via digital distributors, we enable a record label to sell via their own brand, directly to the public. So, label brands, like for example, Freestyle Records are able to link to a website created within ithinkinmusic from their existing website, and retail direct to their customers.
This is different to the conventional way labels normally go about selling MP3s. Because they’re selling through their own brand identity and doing the retailing themselves using our platform, they cut out a distributor and they cut out a retailer, meaning that the share they get for the sale of their music is much much higher. With ithinkmusic labels get 95% of the retail price of their music, so £9:50 from a £10 album sale. The ithinkmusic model is really about making the process of selling downloads from an artist or small label as efficient as possible and maximising profit for them.
Because many record labels use the same system, a record label is allowed to retail music on their website from other record labels. So ithinkmusic stores are not only labels selling their own content, they’re labels selling content from other labels that are working within a similar genre. Effectively, the labels within a scene are supporting the whole of that scene, and each other, by creating a new type of independent retail based on their brands.
The ithinkmusic network only keeps 5% of the retail price to cover costs, as opposed to someone like iTunes, who allegedly keep anything from 30 – 60% – how do you make any money?! Is it sustainable?
The music and all the info is uploaded by the labels. There are a set of tools you get when you set up an ithinkmusic account, where you enter all your information, upload your tracks, add the names and artwork etc. So, there are zero labour costs within ithinkmusic for the whole of this process, which is a bill that digital distributors and other digital retailers have to foot.
Also, ithinkmusic’s not a brand that sells music; we have no investment in advertising our brand as a retail brand. The label brands, for example someone like Bugz in the Attic, pay for the advertising to direct people to their site themselves, so we have no advertising budget. There’s no retail percentage and no distribution percentage for us in getting the music up there. All the work is done by the content owners. So when we remove those shares, we’re left with 5%, which is basically our server running costs. With volume and very little labour involved on our part, we can make enough money to run this service, in fact, more than enough.
A counter argument to going for the biggest return, is the value you get from being on a site with very high traffic, or getting lots of marketing support from a store. What marketing support does ithinkmusic offer?
ithinkmusic is a platform to enable you to retail music yourself, so we are not attracting any customers to your store. What we do have is a network of stores – over 900 – that may pick up your content and sell it for you. Now, each of these stores has a budget and has a method of marketing and has a group of customer themselves. Over 5,000 people buy from stores that are created with ithinkmusic, so there is an audience for your music.
If you’re a jazz label and you publish a release via ithink it may get picked up by, for example, Coopr8, which specialises in selling new jazz and broken beat. They may feature this, and they may sell it. So, it’s a network, rather like physical independent music retail was a network of stores which championed specific, very niche genres.
One of the problems independent music has from the larger stores is that they’re getting no support. iTunes isn’t going to take a folk track or a classical music track and feature it on the homepage. Really, the small labels, from the feedback we’re getting, are actually generating most of the sales themselves – they’re using ithink for fulfillment, and they’re using MySpace and other techniques to direct people to it.
The support you’re likely to get as an independent label from some of the download stores is quite minimal. We’re non-exclusive, which means you can run it and have your music on things like iTunes and Beatport as well. So you can use the technique of pushing the sales you’re generating through your own web presence to ithinkmusic to maximise profit, instead of pushing it to someone like Beatport or iTunes, that are only going to be giving you 40/50% return on sale.
So it’s being able to monetise the fanbase you already have, without sending them off to a retailer?
So many labels have said, “I always sell 2,000 copies, I have this loyal audience. If I mail out to my mailing list, they’re always going to buy from me.” If you sell through iTunes as your primary channel and all the customers who buy your music buy through them, then you don’t get their names and addresses. iTunes is going to retain that information, and next time they release something similar to your release they’re going to contact that customer (which is in my opinion, your customer). If you had used ithink to make that sale, you’d have that customer’s details to contact next time you have a release.
So, I think as well, it’s about bringing the label closer to its customer. If 4,000 people will buy an album direct from you, that’s enough to make a release and exist and create quite a substantial digital income, without ever having to go to iTunes.
Can you explain the community aspect of ithinkmusic?
The way that it’s working in practise; some record labels are supporting each other where there are networks already established in real life, and some brands, for example Straight No Chaser magazine, don’t own the rights to music themselves and are just selling content from record labels they like.
There’s a revenue split here: out of the 95% that goes back to the labels, 65% goes to the rights owner and 30% goes to the retailer. So in the instance where a record label sells their own content they’re getting the whole 95%. In the instance where a record label sells content from another record label, they get 30% of the price. And finally, where a record label has sold their music via another ithinkmusic store, they’re going to get 65% of the retail value, so £6:50 of a £10 album – which is still much much higher that you’ll get if you sell an album on iTunes.
So, as a distribution network, away from selling content via your own store, you’re still getting a margin of retail that is significantly higher than the £4 for a £10 album sale that you’re going to get from iTunes.
What kind of labels do you think would benefit most from being on ithinkmusic?
If you’re working in a niche which has a hardcore of support, a fan base which you’re able to contact, then ithinkmusic is perfect. If you’re trying to develop a fanbase through gigging, or the bands on your label are, ithinkmusic is also perfect, because it gives people the opportunity to register their support with a purchase. For any small label that’s growing or trying to grow into something, and in the process of creating a direct customer base, ithinkmusic’s perfect. If you’re a megastar and you want to sell music direct, rather like Radiohead did with In Rainbows, ithinkmusic is also perfect.
In each instance, it’s a platform for direct retail, which is cheaper than any solution which you could implement yourself. All the labels are sharing the costs, and the 5% is an absolutely tiny margin to pay for that privilege. We’re trying to be as fair as possible with this product, and make it beat anything else on the market.
ithinkmusic isn’t a download store, but a tool that lets brand owners build a download store. Do you have any other tools for record labels in the pipeline?
Yes, but nothing to announce yet. We’re looking to enable record labels to exploit their brand in other ways.
What other music sites / web tools do you think are useful, or even essential for independent record labels?
It’s very relevant for all labels to use other download stores, whether it’s to create publicity, or to gain access to an audience that’s there. So if you don’t have a digital distributor, I’d suggest you look to get one, ideally someone that gives you a non-exclusive deal, so you can still use ithink. There are plenty out there, depending on your genre, and they all generally do a good deal.
Also, if you’re an independent record label or artist it’s good to be savvy using things like MySpace and YouTube and facebook in order to have a presence and create a personality online. At the end of the day, if you’re looking to make sales online, you need to have a presence, or at least somebody from your label needs to have a presence and enact part of what the label does online. It’s very important to be active on blogs and discussion boards in your genre, posting links to new releases, content, or news on what the label is doing – it’s an integral part of the strategy that needs to be developed for any independent record label.
Finally, what do you think the music industry will look like in 5 years time?
Already, we’re seeing a big change. I feel we’re going back to something that to an extent has always existed and is closer to some of the more positive things about music. Most of us that are interested in music have gained an interest through listening, through consuming. I feel there’s a shift in that more of us are taking part, whether it’s creating music electronically, playing guitars or other instruments, making designs, or doing something associated with music.
The tools are becoming more accessible. The distribution mechanisms and middle men are being removed from the music industry and a lot more of us can be involved in painting the picture; filling the canvas of what music is for, for a given generation. It’s not about money; maybe it’s about people making less money, maybe we’re closer to getting a better representation of what society is through its musical production.
Basically, more people are going to be making music, and less people are going to be making money out of music as middle men is what I feel is going to happen.
— Kate