With everything that is happening right now with the Copyright Royalty Board and the new mechanical royalty rate discussions (which will be the first time ever that rates are set for digital products such as digital downloads, subscription services and ringtones – more here from Eric Beall), I thought it might make sense to talk about how you, as an independent musician, can get into the digital music retail game. I did a quick interview for CNN/Fortune last week on the topic of digital distribution, which is a fair enough primer on the basics. Text is below, and shortened interview can be found here.

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The good news is that a lot of what independent labels did for artist in the past can now be accomplished by the artists themselves. Distribution is key among the tasks that in the past were monopolized by labels and are now open to almost anyone through forward-thinking online distributors. Two companies in particular have empowered artists to get their music on iTunes, Rhapsody, eMusic, and the other online retailers: CD Baby and TuneCore. Essentially these online distributors do exactly the same thing – they have direct relationships with the digital retailers and provide a bridge to get your music into the stores. However, they operate slightly differently. CD Baby charges a small fee (currently 9%) for every sale that generates online. Tunecore charges no fee on sales, but instead charges a one-time fee, per store, per album for delivering the music, and one-time charge per song you upload (both charges are currently $.99), plus a $20 annual fee. You’ll need to run the numbers to see which one works best for your particular situation. There are other online distributors popping up all the time, but these two are the most established and have a proven track record of success.

One important factor to note: distribution follows marketing. One does not market their music by getting on iTunes. The key is to generate interest outside of these retailers and to drive folks to the outlet so they will buy your music. This is best done though a fully integrated marketing campaign that focuses on effective traditional outlets, and also takes advantage of the marketing outlets and technologies that are now available to the independent musician (Internet marketing is a big part of this, of course). Quick advice: be sure to have your own Web page to start (do not make the mistake of only having a MySpace page), and tour, tour, tour. Of course, checking out my Music Marketing 201 course wont hurt either. ☺

In my course (which starts on January 7th!) I have a lesson on radio. We go through the opportunities available to musicians at noncommercial radio (the stations that are not funded by advertising, typically located on the left side of the radio dial), commercial radio (those that are broadcasting for profit), and non-terrestrial radio (online and satellite). It’s likely no surprise to hear that the amount of money and resources it takes to get your music played on commercial radio during peak listening times makes it an unrealistic avenue for almost all independent artists and labels. I would argue that there are plenty of more effective outlets for the $250,000 you’ll need to spend on indie radio promoters, $50,000 on the necessary trade ads, and $50,000 on on-air ads that it takes to get considered for non-specialty show radio play on an active rock station in a major market. And even if you do have the money (and really feel that commercial radio is where you want to spend it) the stations have long lasting relationships with the major label promoters that they do not want to hurt, and it’s unlikely you’ll get much support anyway!

That being said, non-commercial radio (community stations, college stations, NPR stations) and some commercial radio (Triple A and Americana / some specialty shows) do have opportunities for independent musicians. But it’s still expensive – to really make national headway you’re going to need independent promoter help.

Which brings me to my point – not only is online radio inexpensive to target (in some cases as easy as downloading a submission form, as is the case with Pandora), but it brings excitement, variety, and most importantly, NEW MUSIC into a medium that has exposed the public to less and less new music for years (I am speaking primarily of commercial radio). Online radio is a medium that is continuing to gain momentum and listeners, which means, of course, that the labels are looking for their cut of the profits. In March, the United States Copyright Royalty Board announced new royalty rates for webcasts, effective to 2010. The CRB endorsed the proposal of the RIAA-associated Sound Exchange royalty organization, which represents the major and some indie labels. The new rates would force webcasters to pay for each song streamed to each user, and increase over the next few years as follows: (details from Wired magazine)

2007: $.0011 to stream one song to one listener
2008: $.0014
2009: $.0018
2010: $.0019

These rates would put the smaller Webcasters that do not have significant advertising revenue out of business. And last week, Bloomberg announced that Yahoo and AOL may abandon Web radio as well with the raise in rates (“We’re not going to stay in the business if cost is more than we make long term,” Ian Rogers, general manager at Yahoo’s music unit, said in an interview). The rate increase is not a done deal, however. Webcasters have launched an appeal of the rates, which begins in February.

I’m all for musicians being paid fairly and taking advantage of all revenue streams, but from a marketing standpoint, does it really make sense to impose rates on a developing outlet like this that will essentially kill all but the largest players? Check out more opinions here.