Selling Music On-line: DIY vs. Third-Party

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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?