I'm just back from the iCommons summit in Dubrovnic, which brought together most of the leaders in the international Creative Commons movement. By far the most interesting presentations at the conference, at least for me, were those by new music companies that are embracing P2P file sharing, not fight ing it, and trying to earn a profit in the process. If these companies survive, or at least if their business models do, maybe we'll finally see an end to the war between the music industry and its consumers.
The first of these companies is Magnatune, run by Lyris creator and Creative Commons board member John Buckman. Magnatune signs artists on a Attribution-NonCommercial-ShareAlike Creative Commons license (meaning the music can be shared and remixed for non-commercial purposes), then allows customers to sample their music for free through Internet radio stations and on-demand streaming. If consumers like the stream they can pay to download the music in a variety of formats. But here's what's interesting: unlike iTunes, where every track costs 99 cents, Magnatune allows users to select the price they'd pay for the album, from $5 to $18. Yet people are paying fair prices: “Everyone assumes we're just getting $5,” Buckman told USA Today, “The average is $8.93.”
One of the smart things about Magnatune is its focus on low-cost commercial licensing. Because documentary filmmakers cannot possibly afford brand-name artists for their movies, Magnatune licenses its music for $150 to $5000, depending on the length and type of the use. One third of Magnatune's income comes from such licensing.
The second music company was Jamendo, whose music is even less controlled than Magnatune's. Jamendo offers all its music under a Creative Commons license, then shares it for free through online streaming and over bittorrent networks like eDonkey. The problem of course is that if the music is so free, how does the website – and the artists – get money? Each artists' page on Jamendo has a small tip jar, to which most of the money goes to the artist and some goes to maintaining the site. Jamendo also gets money from advertising revenue, which it also shares with the content producers. However, unlike on Magnatune, there aren't really any professional musicians on Jamendo; it's mostly talented hobbyists. For that reason, it is unlikely that Jamendo's business model could be a replacement for the major labels'.
Whether or not Jamendo or Magnatune are around in twenty years, they point to some facts about the music industry that the major record labels have yet to realize. First, most people aren't thieves, but they like convenience. People expect to be able to play their content on several different platforms in several different formats, yet the only way they can do this is through piracy. If people are given the opportunity to buy portable music, they usually do so, and as Magnatune's experiment with choosing how much to pay, they usually do so at a fair price.
Second, people believe artists should be compensated for their work. Just as we pay street performers to watch shows we could see for free, or pay waiters for services we would get anyways, Jamendo shows that people are contributing money to the artists they download – and you can see the statistics here
Third, gift economies aren't enough. While companies can and should rely on some good will from their customers (and those who don't often suffer for it), that good will probably isn't enough to build a sustainable business model. If music labels are going to embrace Creative Commons-licensed music, they should look for value-added content to their site. That might take the form of music reviews, rating services, or discussion groups. Following Magnatune's lead, it might also take the form of licensing rights to advertising companies and filmmakers.
What Jamendo and Magnatune show is that the business of music is alive and well – the existing music industry merely needs to harness it.