Magnatune, an Open Music Experiment

It's a record label, but it's not evil. How to build a business without ripping off artists and annoying customers, and why you might need three different kinds of Web server software.

Magnatune is an Internet music record label. It was born out of personal experiences from my wife releasing her CD on a British record label and some observations I'd gathered about the music industry. Magnatune is different from traditional labels in the following ways:

  • We split the sale price of all purchases 50/50 with our artists.

  • We sell only downloads and never use digital rights management (DRM). Purchasers may download albums as perfect-quality WAV or FLAC files, as high-quality variable bit-rate Ogg Vorbis files or MP3s or as 128k MP3s. Buyers can choose how much they want to pay, from $5 to $18 US.

  • You can listen to all our music as streaming 128k MP3s (entire albums, not samples) as well as on Shoutcast MP3 stations. Two clicks on Magnatune queues a never-ending selection of our music in the genre of your choice. Our assumption is you eventually will hear something you like and want to buy it.

  • All our free music is licensed using the Creative Commons Attribution-NonCommercial-ShareAlike license. This allows noncommercial use of the music at no cost, as well as derivative works, as long as the same Creative Commons license applies. If someone uses our music for commercial purposes, they have to license it for a modest fee. All our licensing is done on-line with a standard rate calculator, and we don't discriminate based on the kind of use. For example, we can't and won't block your use of our music if we don't agree with your views or your musical style.

  • We're successful and profitable. Our top artists are making about $6,000 US a year in royalties, while the average musician makes about $1,500 US per year. We work directly with musicians or musician-owned labels, never with labels who funnel the money to themselves.

Magnatune was born out of personal experiences from my wife releasing her CD on a British record label and some observations I'd gathered about the music industry.

When my wife was signed to a British record label, we were really excited. In the end, she sold 1,000 CDs, lost all rights to her music for ten years (even though the CD has been out of print for many years) and earned a total of $45 in royalties.

The record label that signed her wasn't evil. They were one of the good guys, and gave her a 70/30 split of the profits, of which there were none. The label got battered at every turn: distributors refused to carry the label's CDs unless it spent thousands on useless print ads, record stores demanded graft in order to stock the albums and, in general, all forces colluded to destroy this small, progressive label.

Industry Observations

Radio is boring. Everyone I know listens to interesting music, yet good music rarely is played on the air. Most musical genres barely are visible in record stores, and they are totally absent from the airwaves. These days, radio plays mostly Country, Pop and Rock, with a little bit of dull, safe Classical thrown in.

CDs cost too much, and artists receive only 20 cents to a dollar for each CD sold, if they're lucky. And, most CDs quickly go out of print. I buy more CDs from eBay than from Amazon.

On-line sales, such as Amazon.com, often cost artists 50% of their already pathetic royalty, due to a common record contract provision. International sales and markdowns often net the artist no royalties.

Record labels lock their artists in to legal agreements that hold them for a decade or more. If the agreement is not working out, labels don't print the band's recordings but nonetheless keep artists locked in to the contract, forcing them to produce new albums each year. Even hugely successful artists often end up owing their record labels money because the advances they're initially paid are structured as a loan to the artist. Furthermore, the label does its accounting in such a way that profits rarely are shown on the record company's books, hence no money exists to pay down the advance.

Using the Internet to listen to music usually is tedious. There are too many ads, too many clicks and the sound quality is not great. Simply put, it's too much work for not enough reward. A well-run Internet radio station, such as Shoutcast or Spinner, solves that, but the entrenched record industry wants to kill them too, through onerous licensing terms and annoying DRM schemes.

Given all these factors, I thought, “why not build a record label that has a clue?” Create a label that helps artists get exposure, make at least as much money as they would make at traditional labels and get fans and concerts. Magnatune is my project. The goal is to find a way to run a record label in the Internet reality: file trading, Internet Radio, musicians' rights, the whole nine yards. These aren't things that can be ignored.

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Re: Magnatune, an Open Music Experiment

Anonymous's picture

This is the single best thing that has happened to the music industry. Giving the consumer broader options (multi-format downloads, listen before you buy, etc.), in addition to the 50/50 split w/ the artists, equals exactly what I've been looking for!

Promotional and Advertisement expenses

Anonymous's picture

Can you kindly tell me the approx promotional and advertisement expenses of online music companies, magnatune for eg.

Thank you

is it 80% of the revenues?

Anonymous's picture

is it 80% of the revenues?

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