For every band that has a hit record, there are dozens of others that will never make the music charts, headline big concert tours or have their recordings featured in the main aisles of music stores. But an innovative business called CD Baby allows them to sell their music on-line. The Portland, Oregon-based company has found a middle ground between corporate record labels and the independence of the Internet by selling music that is unavailable at mainstream stores.
"This was a utopian experiment in how a distribution deal could work out from a musician's point of view," says CD Baby founder Derek Sivers. "We don't owe anybody money. We've never had any investors, always refused investors. And we can make it whatever we want."
Mr. Sivers himself started out as a musician. In 1996, he had a band called "Hit Me" that was selling their CDs at shows and receiving airplay on some college radio stations scattered across the country. But the they could not get any distributors to sell their CDs. So, in 1997, he set up his own website for the band's music. Then, when his friends also wanted him to market their tunes on-line, cdbaby.com was born.
The company now distributes music by more than 75,000 artists. Their CDs, filed in alphabetical order, line shelf after shelf in a 1,700-square-meter warehouse near the Portland airport. The styles range from classical to country, and rap to rock. There is a large sampling of international music, including songs from southern Sudan, original pieces by Kenya's leading songwriter, and new interpretations of the ancient Indian tradition of chanting hymns from the Vedas.
Any artist is welcome to sign up by paying a flat, one-time fee of $35 and sending CD Baby five CDs. The artist sets the album's selling price -- of which CD Baby gets $4. Nobody is kicked out for not selling enough.
The concept appealed to Seattle singer/songwriter Jimm McIver, who heard about the website from a friend and thought it sounded like an easy way to get some extra exposure for his record. "At first I was just curious and checked it out," he says. "But as soon as I joined the process, you know, Derek starts giving you feedback and just walks you through the whole thing. It's one of those rare businesses where I think the person doing it is really, sincerely driven by wanting to help people."
Mr. McIver has sold only about 10 copies of his record through CD Baby, but he says that is fine with him. That may be typical of most of the website's musicians. There are no sales targets or charts at the CD Baby offices. Derek Sivers says the company keeps tabs on how it is doing every Monday evening when it cuts checks to musicians…paying out a total of $10 million so far. "I think that means we've done about 15 million in sales," he estimates. "Counting the number that comes in is the greedy way to look at it. Counting what goes out, that's what makes me happier. I measure milestones by how much we've paid to the musicians."
Industry observers say that, by any measure, CD Baby has been successful. Market research analyst Phil Leigh of Florida-based Inside Digital Media, says Mr. Siver's company has become more than an online record store. "It's really become an independent label that represents artists that have not been represented by other labels," he says. "And he's been successful doing that because the typical consumer, the vast bulk of consumers, still want to buy music in the form of CDs, [and] he's got the bigger part of the market. But the way he became an independent, successful label is because of the power of the Internet."
Mr. Leigh believes the future of music on the Internet is digital distribution. CD Baby has been active on that front, as well. In addition to shipping out actual CDs, the company now distributes more than 300,000 of its musicians' songs digitally through major online music services, including iTunes, MSN Music and Napster. The artists get their cut of those sales as part of the regular Monday checks from CD Baby. Derek Sivers says his company takes a loss on those transactions, and digital distribution may actually put CD Baby out of business. But he says that's okay…it's the music that matters.