Is It Better To Sell CD's, Or Music Downloads?
By: Jerry A. Greene
Question: I am a solo artist. I have been looking into getting CD's manufactured and have been a little weary of spending the money on the CD's without knowing if I will sell enough to break even. Is it better to sell downloads from my website instead, or should I still get the CD's made?
Answer: Music downloads are fast becoming the preferred method of distributing music, yet CD's still have their place in an artist's revenue stream.
File Sharing Since Napster
Since the early days of p2p file-sharing services like Napster (now a legal music download subscription service), consumers have been getting used to the idea of downloading music instead of purchasing CD's. There are many different reasons consumers are doing this:
iTunes and the $0.99 Download
Services like iTunes and Rhapsody, have answered the call for easily accessible music downloads at a cheap price. Instead of the consumer having to purchase an entire CD at what they felt to be too expensive, they are now able to purcahse the songs that they want at a very good price. This has been a very successful business model and one that has the record business scrambling to comply.
People Are Still Buying CD's
Despite the fact that downloads are generally more affoardable and convenient, there is still a record-buying public out there. It is extremely important that you consider having CD's pressed if you perform live. At the current time, this is still the best way for an artist to make money at a live performance. The income from back-of-the-room CD sales is what allows them to keep doing what they do best: perform. Most people can not download songs right there and then at the show, but that is all changing now.
The Future of Music Sales At Live Performances
It is now possible for a band to get up on stage, play an amazing show that really "wows" the audience and then precedes to tell everyone to take out their portable music device (their phone in a lot of cases) and download their new CD directly to the device. This is even able to be done with automatic payment systems that charge the CD directly to the persons credit card, or paypal account, without them having to do much of anything. It really is immediate gratification! As of August, 2007, it is still important to have CD's for sale at your gigs, but it is now becoming even more important to have downloads available at will.
Advantages of Not Pressing CD's
One of the main advantages of not pressing CD's is that there is no manufacturing cost, or inventory to look after. You post the song files to your site (or music download hosting provider) and that's it. They download can be sold once, or a trillion times. The cost is either a small one-time processing fee, or percentage based fee system for a music download hosting provider, or free (or next to nothing) if you do it yourself on your site through programs like 123 Music Store, which uses your paypal account to take credit cards. The ability to take credit cards is a cost of doing business and the fees can generally be deducted from your taxes. Check with your accountant on that one.
Advantages of Having Your CD's Pressed
Even after downloads have become more than 90% of the music purchasing market, there are still going to be people that want to hold in their hands a physical piece of merchandise. They like looking through the printed insert while listening to the CD and the whole "physicalness" of the experience (I'm sure you understand what I mean). These are things that are not likely to go away anytime soon. Independant musicians will tend to do well selling CD at their gigs, for quite a while.
Online Record Stores Like CDBaby
There are online record stores like CDBaby that take care of the storage of inventory, packaging and shipping, and collecting money (with a percentage going to them) for CD's sold from links coming from artists' websites. They also have services which host digital download versions as well and can help you get listed in the big music download services like iTunes and Rhapsody. This is a good hybrid mix of retail distribution (though it is through online ordering) and digital download distribution).
There are now services (like the current Napster) which allow members to download as many songs as they want for a once-a-month subscription fee. This is now becoming the main competition for download sites like iTunes. You can have your music listed in these new subscription-based sites as well.
CD Duplication Is Now Very Affoardable
If you do want to go the route of CD Duplication, you will be glad to know that the costs associated with pressing a new CD release is now well within range of most musicians. You can get professional looking, silk-screened CD's put inside jewel cases with cover art, full-color inserts, a barcode (needed for retail sales) and shrinkwrapping at a cost of less than $1400 for 1000 CD's. You can get them for even less, if you go with more economically priced packaging like full-color jackets, instead of jewel cases, for under $1000 for that same 1000 CD's. At that price, if you sell your CD at $10, you'll have the money you invested in them within the first 100-140 CD's sold, with the remaining 860-900 CD's being 100% profit. At $10 a piece, that would mean $8600-$9000 in profit once you sell your full pressing of 1000 CD's. If you do a lot of shows and really make a point of promoting your CD, you can get to the point of making a profit rather quickly.
CD Duplication In The Home
If you really want to go the cheap route, and only keep a few CD's on hand at any one time, you can always go the route of dupicating CD's at home. It's now possible to by CD's on a spindle for less that $0.10 each. You can burn the CD's on a standard computer CD burner, or purchase a small CD duplication machine. You then print out your own inserts and labels, stick them in a case (also very inexpensive to buy in bulk) and sell them for even greater profit at your gigs. The costs per CD can be as little as $0.20! Just think of the profit margin on that! If you sell just one CD at $10, you've made enough to cover the cost of printing about 50 CD's!
This is usually the route that small bands take when first starting out, giving them the ability to sell a physical product without a lot of investment in inventory. It's then very common to take the money they make on these sales and put it towards professional printing of their first "major commercial release".