Today’s Wall Street Journal profiles TuneCore, a digital-distribution service with a slightly different pricing structure than its competitors:
Jeff Price, owner of the New York independent label SpinArt, started TuneCore to provide the same services as other aggregators, but using a flat-fee model. Clients — record labels or artists — pay a one-time charge of 99 cents a song, plus a handful of other modest fees. For example, a five-song “album,” sold for a year on four different online music stores, would cost a user $18.89. Each additional year selling the album on the services would cost $9.98.
TuneCore then passes along 100% of the wholesale price it receives from iTunes, eMusic.com or others. (That fee is about 62 cents from iTunes; eMusic calculates its payments to record labels using a more complicated formula that generally results in much lower payments per song sold, TuneCore says.)
Mr. Price says he sees his new venture as a fundamentally different proposition from running a record label. “We moved out of the exploitation business into the service business,” he says. (All his label’s online sales go through TuneCore.) He adds that he started TuneCore after examining his options as an independent record-label operator. Most other aggregators, he says, collected fees based on old-line ways of doing business — taking a percentage of every sale, despite the fact that digital distribution is more or less a one-time proposition. “They don’t have warehouse and ‘pick and pack,’ ” he says. And unlike traditional record labels, “they don’t advance money for touring or recording.”
Moving from the record-label business to the service business was a smart one for Price–not only is the overhead a lot less, the tightly focused nature of the business means that TuneCore can hone in on doing one thing, and doing it well. (They’re currently working out their system so artists can disburse funds to music publishers and other parties owed money directly from their TuneCore earnings.) One question we had: As digital retailers become more powerful, will wholesale prices for songs go down? And if they do, how will companies like TuneCore adjust–and will it eventually be forced to change its model in a way that might remove their competitive advantage? Maybe we’re looking too far out–apologies, sometimes our PTSD from the first dot-com bust still creeps up on us in weird ways.