Online Extra: Team Love: Downloads Sell CDs

The indie labels co-founders talk about how the Internet has changed the dynamic in the music business

Nate Krenkel and Conor Oberst, founder of the indie band Bright Eyes, are music industry veterans who are taking a novel approach to selling CDs. Their new label, Team Love, posts all the songs from their young bands' albums online for free. That way, people can hear the CDs before forking over money to buy them. Team Love is pairing this online marketing with sending CDs to college radios and the touring of their first two bands: Tilly and the Wall; and Willy Mason, an acoustic musician from Martha's Vineyard. Tilly's album Wild Like Children was released June 22, while Mason's CD Where the Humans Eat comes out in October.

This approach of working with the Internet instead of fighting it could reshape the music industry, breathe new life into indie labels, and help foster more creativity. Still, Krenkel and Oberst aren't walking into the venture blind. The 24-year old Oberst helped start Saddle Creek, Bright Eyes' label, and has been in the music business since he was 13. Krenkel worked for eight years at major labels, including EMI and Sony (SNE ), signing bands and songwriters before he quit to manage Bright Eyes. BusinessWeek Internet Editor Heather Green recently spoke with Oberst and Krenkel separately. Here are edited excerpts from a combined version of those conversations:

Q: Describe your meeting last year with Saddle Creek, when you decided to start Team Love.


It was kind of funny. We sat down and told them our ideas for the label, that we wanted it be an artist-friendly label that was very much modeled on what Saddle Creek had done but with the addition of some different policies on downloads and contracts limited to one record at a time. That allows the artist and the label the chance to reassess everything at the end of the process.

I remember them saying running an indie label isn't the line of business you want to go to into if you want to make a quick buck, but they were supportive and curious about it.

Q: Why did you want to start a new label?


Saddle Creek started as a group of our friends. We didn't know what we were doing and figured it out as we went along. My friends are more involved with the day-to-day stuff at Saddle Creek now. It got to the point where there were so many of us, and a lot of our musical tastes had diverged, so that it became harder and harder to make decisions as far as making records.

I lost out on a couple of records I had wanted to help release. Team Love is an outlet to keep stuff moving forward and keep giving people the ability to hear all this music from new bands who deserve to be heard.

Q: What did you want to do differently?


The ideas we had, we didn't just pull them out of thin air. We have been witness to the last half-dozen years, watching how the debate has evolved with downloading becoming the scapegoat for all the ills of the industry. It became more disturbing to us, and we thought, there has to be another way to approach this.

I remember being in a meeting in early 2003 at Sony, where a big exec was giving us a talk. He used the phrase "shoplifter" to describe the downloading. It got to the point where it was accepted to think about it that way.

There was the other side of the thinking, with Conor and myself wanting to have the freedom to work with the bands that we liked, instead of making choices by committee. Saddle Creek has a set number of bands that release albums each year, and it's harder and harder for them to bring in new bands.

Q: What has been your experience in the past with the Internet?


Part of what I have observed through the years at Saddle Creek was how much of an asset the Internet was to us. It put us on the same playing field as these huge businesses, in terms of helping put us in touch with kids. In Nebraska, we're lucky we have one good record store. But places in South Dakota [for instance] don't have cool record stores. In the past, we had to think of ways to get people to listen to music.

I always thought [the Internet] it was a great thing, and obviously the people it hurts are the big labels, and I think that's ironic and great. Because the Internet changes the dynamic. All of a sudden, it takes away the marketing advantage that the big labels have, and it gives people a chance to listen to music they couldn't hear on the radio or get in a Wal-Mart and to say, "I like it, and I want to buy it."

We're banking on this social contract. If this is music you like and you want to support, it's not that much money, you should do it. People are smart enough to understand that concept.

Q: How are things going so far?


We started with 5,000 copies of Tilly's CD and have re-pressed it twice. [Of those pressed CDs, Tilly has sold 3,000]. Our goal was to sell 10,000 in the first year, since the label is brand new and this is the first record out on it. Tilly is where we want them to be. They just ended a couple of weeks touring with Pedro the Lion, and they sold out of the CDs they had on the road.

For Tilly, we think their strength is in seeing them live. This is the first opportunity people could see them out with the CD. Kids left the concerts liking them. Then they're doing a bigger tour this fall. We feel like it's an effort that started at the ground and builds out, and it's definitely building. The ground work is getting done, we're getting the first few thousands sales, and the word is out.

Oberst: There's a certain natural level that we can get to. I imagine it will grow slowly. Mostly we just want to work with people we really believe in. It's not a matter of trying to find a band that will be the next thing, it's about working with people who make great music and enjoying what they're doing.

Q: You know the arguments about downloading. Why do you think it can help an indie label like you?


We thought downloading could be used more as a promotional item. Something exponential is going on. The more music is downloaded, the more it sells. There will always be more copies downloaded or shared or put on tapes than copies sold. But when someone looks at how much a record has been downloaded and equates that to lost sales, that has always been backwards to me.

It isn't something that we think will work for everyone, and we're not absolutely certain it will work for us. It will take a good year of practicing this to attempt to measure what's going on, but there are things out there that suggest it's not as bad as people say. We just want to let the downloading happen by people and attach to it that we would still like their support, whether that's attending a show, or buying a record for themselves or for a friend, or buying a T-shirt.

Oberst: Obviously, it seems like a good thing to do. There's a morality about it, about saying let's just share this with everyone, let's not just let this be a commercial good when in our eyes it's a work of art. The whole comparison to shoplifting is absurd and a desperate attempt to hold onto this control that has been accumulated. I also think it's just pragmatic from our position. We want people to hear the music. We don't have the advertising dollars to be on TV and radio. It makes sense.

Q: You have said you anticipated some problems with your downloading policy when it came to your artists negotiating album rights outside of the U.S. Can you talk about that?


We knew, because we weren't going to asking for the global rights, that when a label overseas chose to license our release either they wouldn't have an issue, or they would have a big issue. The labels [in Europe] Willy Mason is talking to, the one he went with, they're not going to be happy with it. We have told Willy that we're not going to put his record online if it jeopardizes his relationship.

It doesn't make us happy. We think it's important to be as consistent as we can, but we won't jeopardize our artists' opportunities. The way I see it going down is we hope to find a compromise where we can put a body of work on the site that comes as close as possible to the goal of understanding what Willy is doing, just give someone a chance to listen to Willy for a while before they buy the CD.

Oberst: First and foremost we want to be a label that's good to our artists, that's truly artist-driven and -friendly, and that's not just saying that. If it means setting aside things that are important to us to let him have the kind of career he wants...we're just happy to see him go and go.

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