Column The Long Tail theory posits that the infinite shelf space made possible by the internet enhances the market value for "niche products". In the case of the music, that means indie artists. Unfortunately, the real benefit of the Long Tail flows to the distributor, not the artist.
MySpace's plan to allow indie artists to sell downloads is an example of how vendors can use the Long Tail to make money. Too bad it won't help artists very much.
The indie artists of MySpace may each make $10, or $100 or $1,000 for an entire year. There are an estimated 3 million artists actively using MySpace, and if each averages only $100, that's $300m. If MySpace takes a chunk of that, and it does - MySpace and SnoCap, which handles the back-end, share a 45c transaction fee for every download - that's a nice return. Assuming the average download is 99 cents, MySpace and SnoCap will make almost $150m.
And this doesn't even include advertising revenues. Meanwhile, the average artist will only get a little more than $50 bucks.
Similarly, aggregators such as CD Baby and Orchard also take a percentage from each sale. CD Baby only takes a nine per cent commission; the Orchard does not make its commission public. It distributes indie music to hundreds of online music stores and an increasing number of mobile providers. These are honourable businesses which account to artists fairly and promptly. They also provide distribution to prospective music customers throughout the world. And without them, particularly CD Baby, many of these artists would never receive any distribution at all.
But without a great deal of promotion and marketing, it's virtually impossible for an artist to be noticed and make significant income because of the tidal wave of music now available online.
Notwithstanding the disadvantages facing artists who use aggregators to get attention for their music, the traditional business model was even worse for artists from a financial point of view. Under the standard recording contract, the average artist only receives around 10 per cent of retail and this is before standard deductions including up to 35 per cent for packaging.
Even worse, the artist doesn't see a dime of recording royalties until the record company "recoups" recording and marketing costs. Since they recoup at the artist's royalty rate - generally less than a $1 an album after all the deductions - the artist doesn't see any recording royalties unless they sell a massive number of units.