After post #5 in this series — the comment by Derek Sivers — the conversation in the comments exploded with long, excellent and well thought out dialog. This post is a heavily edited digest form of the comments, with my own replies interspersed and a concluding section at the bottom of the thread.
The thread which fired my imagination the most was this exchange between Victor and Derek.
victor (who is a musician and runs the CC Mixter music community where gurdonark is a major star) said:
I don’t want to put anybody on the defensive but I challenge the idea that you really see it as someone else’s job to serve as bridge between consumer and warehouse. CD Baby has ‘editor pick’ and ‘music for your mood’ ‘flavor of the month’ etc. I don’t know of an artist, upon seeing that, who would assume you are truly unbiased and uninterested in their ultimate success.
paypal is unbiased. archive.org is unbiased. you guys want a hit.
Derek Sivers (who is the lead at CD Baby) said:
Yeah. I agree. In a new future version of the site, I could see us not having that editorial aspect at all anymore, but rather finding a way to import/syndicate others’ editorial reviews, instead.
But we do listen to every CD anyway, so that we can make sure the clips are correct, and know which albums to link to which others.
So here’s the really big question: do the business of hit records that they do at the major labels and the business of non-hit records that they do at the artist services companies have to be in competition? What is the economic relationship between record labels and artist services companies?
/me scratches head.
A comparable issue that comes up all the time at Yahoo is that content projects like Live Sets can have good return on investment, but can’t grow as large as generic applications like web mail and search. (This isn’t confidential info, by the way). Content can be a fine line of business, but can never be as big a business as horizontal products like search, because each bit of content has to be hand-made.
The implication for this conversation is that artist services companies are expecting to have lower returns on investment than record labels but be larger businesses overall. They have gained the ability to grow larger by refusing to accept projects which can’t be automated and offered to all of their clients on equal terms.
If you were a venture capitalist, what you would care about is that artist services companies have bigger upside than record labels. The potential payout is lower for a label than an artist services company. Investors looking at Tunecore or CD Baby on one side vs Sony/BMG or Universal Music Group on the other side would treat them very differently.