Selling Music On-line: DIY vs. Third-Party
You have recorded your band’s music and replicated your master onto hundreds of shrink-wrapped CDs. Congratulations! Now how do you transfer your prized CD from your basement to your fans’ hands and receive compensation in exchange?
Note: The focus of this blog is the on-line sale of physical CDs. On-line music downloads, selling merchandise (including CDs) at performances person-to-person and wholesaling physical CDs to brick and mortar distributors and retailers are potential topics for future blogs, but are not covered here.
DIY Managed On-line Store vs. Third-Party Music Retailer
Through your band’s website you can DIY (Do it Yourself) and maintain an on-line store or you can contract with a third-party to maintain an on-line store to sell your music. As with everything in life, there are pros and cons to each approach. Research the alternatives, understand the pros/cons and get clear on the desires of the band members. Once you have done your research you will be able to determine the best course of action for your band.
Creating an On-line Store to Sell your Music
This approach gives you full control of your music sales. You collect all information regarding your customer including name, address, payment info, e-mail, etc. You decide what payment methods you desire to accept. If you desire to accept anything other than cash or check, you will need to setup a merchant account to accept on-line payments either via credit cards directly or through a third-party payer such as PayPal or Dwolla. With this approach, you are also responsible for all product fulfillments. Therefore, you will need to buy CD mailers or use mailing materials from your carrier. Free materials are available from the post office or overnight carriers such as FedEx or UPS. Personally, my perspective regarding overnight carriers is that FedEx does a better job with small packages and UPS does a better job with large boxes. However, this is my personal bias. You need to decide which carrier meets your needs. Although we have opted to consign our CDs through a third party for most of our on-line fulfillment, friends and family generally contact me directly. For the limited mail order fulfillment for which I’ve taken responsibility, I’ve decided the United States Post Office is the best approach – their price point is cheaper than overnight carriers and there is a location convenient to my house. Initially, I used the small priority mail flat rate boxes. The “pros” are that the post office provides the box free of charge, it is a professional looking box, and you can receive delivery confirmation for an additional fee. The “con” is the cost. At $5.20/each for priority mail flat rate boxes shipped domestically, it is much cheaper to just send one CD first class with your own packaging. We now use Uline’s CD mailers, shipped first class. The biggest overall “pro” of the alternative to create and maintain your own on-line store, is that you keep more of the revenue from each sale. Although you will have to pay merchant fees, sales tax, postage and packaging expenses, which will cut into the profit of these sales. The biggest “con” of this alternative is that you have to do everything: 1) create a store front to gather customer information, 2) process payments, 3) fulfill order requests, and 4) remit sales tax to every jurisdiction to which you deliver your CD.
Distributing Music through Third-Party Retailers
This approach leverages templates from on-line retailers to document information about your music and your band such as band biography, official website, genres, ‘sounds like’ information, album notes, reviews, etc. Many times the on-line retailer has a store widget that can easily be embedded into your band’s website. The store widget should display the songs on your album, allow the potential customer to listen to the music, and facilitate purchase by launching the third-party retailer’s website. The on-line retailer collects all the information regarding the customer such as their name, address and payment information. This is the approach Eclectic Verve decided to employ. We felt the “pros” far outweighed the “cons”. The biggest “pro” is that I didn’t have to do it all. I didn’t have to become knowledgeable about every sales tax jurisdiction in the country, design a store front, capture and securely store information about my customers, and fulfill all the orders. I decided it was more important to me to focus my time on aspects of the business that were more enjoyable to me and I was willing to give up some of the revenue to the third party, which is the biggest “con” of this approach. There are numerous competing third-party retailers in this space. Three of the larger distributors include CDBaby, ReverbNation and TuneCore. Pricing models and distribution channels are similar, but each has its own differentiator.
We determined CDBaby was the best choice to distribute Eclectic Verve’s debut CD. What is your perspective? Which alternative is best for your band and why?
Thank you for your feedback, Andy. Great advice!
I should have mentioned in my blog that we also use CDBaby’s Digital Distribution Partners. For others researching alternatives — Andy’s clarification is an important one. You can either 1) engage CDBaby (or other similar services) to only sell on their websites or 2) to also distribute to their entire partner network.
I’m currently working with an artist who has 6 CDs up for sale and the best option looks to be CDBaby. They handle most everything. Fulfillment is a big deal, especially if it goes well and I don’t think most people are willing/able to wrap and ship even 50,000 CDs in a year. Sure 50,000 sales would be great but that leaves little time for anything else, and it’s not that huge a number if it really catches on. That comes to about 137 discs per day, every day.
And Cindy, I think you need to check into that sales tax issue. At present I don’t believe you have to collect and remit sales tax for “every jurisdiction to which you deliver your CD”, but only for the ones where you have a business set up. I.e. if you’re based in California you need only remit sales taxes to California for sales into California.
Best Wishes to all.
Thanks for your comments, Dave. It’s affirming that the artist you’re working with came to the same conclusion we did — CDBaby is the best choice to meet current needs.
I appreciate your feedback on the sales tax. It’s definitely a complex issue, and unfortunately, there is no standard. Every jurisdiction has its own rules, filing requirements, filing frequency, etc. I’m very happy CDBaby is responsible for collecting sales tax from most of our fans! (We take responsibility for collecting sales tax when we sell our CDs to fans at our performances. For those few jurisdictions, I’ve spoken to someone at each jurisdiction to learn their specific requirements to ensure our compliance.)
This is an important topic to consider, and frequently one that we as artists don’t think about until our project is done and we are ready to release the CD. Without the help and guidance from employees at a record label, a DIY artist is left to juggle many aspects of the art and business.
I also chose to distribute my newest release through CDBaby, both physical discs and through their digital network. However, I also sell CD’s through my own website and at live shows. In the current independent music market, we have to take every opportunity to get our music in front of an audience. CDBaby has an existing customer base that just might discover your disc on CDBaby.com, but might never find your website.
Thank you for your feedback, Branden. I agree that like you, as a fellow indie musician, we juggle a lot of business aspects to support our music that other artists outsource or have a label handle on their behalf.
You also articulate an important point: “In the current independent music market, we have to take every opportunity to get our music in front of an audience.”
Thank you for sharing your comments.