Thanks to their ability to help young musicians win fans and launch careers, music sites are attracting indie artists and record labels
Josh Epstein began his bid for rock stardom the "old-fashioned way." The 24-year-old jammed with some kids from his suburban Detroit neighborhood, recorded a demo, and shopped it to every record label and club owner whose address he could find. He generated some buzz, but not enough to grab major-record-label attention.
Then he went digital. His band, The Silent Years, uploaded its music to News Corp.'s (NWS) MySpace and entered online contests. Soon they had more than 14,000 MySpace friends and fans talking up their tunes on imeem, a Web site where users share playlists of their favorite music and videos. The band is now closer to a major-label deal than ever before thanks to a music video competition run by Music Nation, a site that awards winners an Epic Records contract. "Without people downloading our music, very few people would have heard it," says Epstein. "The Internet has been huge."
While well-established artists with sales to lose from music piracy often regard online media-sharing companies as a mixed blessing, independent artists have embraced such young startups and their ability to launch bands from obscurity into stardom. (A story often retold by would-be rock stars is that Las Vegas' Panic! At the Disco got signed after sending around a link to its PureVolume site.)
Music and Web Peers
The startups have, in turn, embraced the young artists, developing increasingly better tools and deals to encourage indie bands to post content on their sites. It's not hard to see why these groups have a kinship. Like the indie bands they're promoting, the founders of the raft of online music sites are often young entrepreneurs themselves who are also struggling to get noticed in a world dominated by MySpace and Google's (GOOG) YouTube. The founders of many of the most buzzed-about sites are age 30 and under (see BusinessWeek.com, 3/26/07, "Building a Super Cell Phone").
Take Dalton Caldwell, for example. The 27-year-old chief executive of imeem is one of the young entrepreneurs featured in BusinessWeek.com's up-and-comers under 30 story. His company works with 200 indie labels to promote their content, in addition to providing playlist sharing tools.
The benefit of focusing on indie labels is twofold: First, independent artists want to work with the companies. Second, their content seems to entice groups to congregate, discuss, and network like no other content. In February, Caldwell says, imeem saw 20 million unique visitors. That's a lot of eyeballs to sell to advertisers. "Literally millions of tracks from independent labels are going to be part of our advertising model," says Caldwell.
Some Sites Charge Commission
Last.fm—a music recommendation site and social network run by two other young tech entrepreneurs: Richard Jones, 24, and Felix Miller, 30—is banking on a similar business model. The company detects songs that users have on their computers and then recommends music and other users whom they might like based on the songs in other users' digital collections. Last.fm, which Jones says has 15 million unique users a month, makes money through advertising and by taking a portion of the sales it helps generate from linking to online music and concert ticket sellers. "People come to us to sell new music," says Jones.
Advertising isn't the only business model out there. A host of relatively new companies are charging commission for promoting and selling indie music online. Amie Street, an online music retail site for indie music, enables users to sell their music for a $5 storage fee, taken out of the first $5 in sales. It then charges a 30% commission on songs, which sell for less than 98¢ (see BusinessWeek.com, 10/30/06, "Young, Fearless, and Smart"). EMusic, a download site second only to Apple's (AAPL) iTunes, has a similar focus.
Lala.com, another online CD store that takes a cut of CD sales and also a portion of $1 CD trades, promotes artists via online radio station WOXY.com, which has 100,000-plus visitors every month. This year, the lala team went to the SxSw (South by Southwest) festival, held Mar. 9-18 in Austin, Tex., and broadcast up-and-coming acts. It also partners with prominent music studios to host online voting for battle-of-the-bands competitions, says John Kuch, lala's director of business development.
Winning Fans Without Labels
Other sites make money by charging the bands themselves. Music Nation charges bands a $25 entrance fee to compete in online music video contests for record contracts. The site launched its first contest on Jan. 29. More than 1,800 bands already have submitted videos, and hundreds of thousands vote each week, either on the site or through MySpace and YouTube, says CEO and founder Daniel Klaus.
A 33-year-old veteran of Canada's indie music scene, Klaus says that digital has revolutionized how label artist-and-repertoire (A&R) scouts find new talent. "Before, you had to send your demo tape to some A&R director and get them to listen to it," says Klaus. "Now bands can build up a following for their music without having any A&R [representation]."
That's not to say that bands are all getting famous online. Despite all the hype the Internet can bring, there's still a need for bands to grab the gear and perform. No one knows this better than Jon Whitlock. The 24-year-old lead singer of punk band The Barons has never played a gig, yet has an online following of nearly 1,500 and is in the running for a recording contract, thanks to a music video the band created for $90 and uploaded to Music Nation. "Our success is off of these Internet contests," says Whitlock.
To really grab attention, however, Whitlock and his band are gearing up to perform at this year's Edgefest, a stadium concert headlined this year by MTV darlings The Killers. "We got to play really well," Whitlock says.