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CD Baby Works for You
June 14, 2003

Apple iTunes + independent music

by: Derek Sivers
President of CD Baby

I got an invitation to go to Apple's office for a presentation/meeting today (June 5, 2003) about how to get independent artists into the iTunes Music Store. There were about 150 people there, representatives from the best independent record labels and music services, in this invitation-only conference room. Steve Jobs came out and started a two and a half hour presentation/seminar/Q&A about iTunes and the benefits of independent labels making their music available there. I type fast and had my laptop, so I wrote down all the major points of their presentation as they went.

NOTE: I've skipped the super-basic introduction to iTunes and what it does, because that can be found so many other places. This is the stuff that I felt was most important to musicians:

The basics

The basics of iTunes Music Store are covered in many places, so if you haven't used iTunes Music store yet, read these links first:
Apple's iTunes Music Store website.
Great video showing the service.

NOTE: iTunes is not a website! It can only be accessed from the iTunes software run on Mac OS X (now) and Windows (by the end of the year.)

I highly suggest trying it for yourself. If you don't have a Mac, use a friend's. Enter your credit card info and actually buy a song. Tell it to store your info for future purchases. Buy a few more songs with the one-click system. I'm serious. You should try it yourself to really experience how amazingly cool it is.

They're using a DRM called Fairplay to make sure you can't put these songs on the internet and have them play on another player.

Current Stats:

1) There are 6-7 million copies of iTunes in use.
3.5 million songs sold so far. Selling about 500,000 songs a week now.
More than 75% of songs have sold at least once. There is a wide breadth in purchasing. This is not only fueled by hits.

2) 45% of all songs have been bought as an album. In other words: don't worry about the death of the album format. 45% of people prefer to buy as an album anyway, even though they always have the option to only buy per-song.

3) 90% of sales are 1-click downloads. (1-click is where customer has credit card stored on file, so that as soon as they click a song title, it starts downloading and their credit card is automatically charged.)

4) 10 previews (free 30 second listen) for every purchase. Meaning: 10 listens per buy.

Price of music on iTunes

1) Songs must be 99 cents each.
2) Full albums are recommended to be $9.99 or lower.
3) Album price must be less than or equal to the sum of their tracks. So if you have a 5-song album, it can't be more than $4.95 to buy the full-length album.
Apple strongly recommends going even lower than $9.99. They'd like to see that price drop to make the full-album purchase even more desirable.

Only exception: if a song is over 7 minutes long, they won't offer it as a separate download. It will be available as part of the album only.

There is no cost to put your music on iTunes.

1) There will be no up-front advance from Apple.
2) Details on the wholesale price to the label will be mailed to us, later.
3) Sales report to SoundScan

Apple is reporting all iTunes sales to SoundScan!

SoundScan measures per-song not per-album.
So if someone buys your whole album, each track on the album is reported as a song sale.

SoundScan requested to do it that way. It was their idea, not Apple's.

About positioning and getting attention on iTunes

Apple has hired an editorial staff with backgrounds in music to decide what gets featured.

Editorial team makes decisions every day as to what goes where.
Big labels don't get preferential treatment.
"We pick music we like, and we think everyone else is going to like."
"We've had a lot of people offer money", but Apple refuses money, and has no plan to ever accept money for placement.

Even what looks like a banner ad at the top of the screen is put there by Apple.
When an audience member doubted they'd stay with this policy, they pointed to their 20 years of selling Apple computers, and never selling icons on the desktop or any of the other things that companies have offered to pay them a lot of money to do.
(Plus Steve Jobs reminded us they have $41 billion in the bank and are not in debt. They're not desparate for cash.)

They did admit that when a popular artist gives iTunes exclusive tracks, that may prompt Apple to make a banner an on iTunes promoting it.
New releases sell really well.

Exclusive tracks (songs that aren't available on CD anywhere) sell amazingly well. They're the best sellers in whole store.

Occasionally they make a special featured artist page, with video, photos, a link back to the artist's site, and more. It seems this is just for very high-profile artists, though.

Top-seller charts on Apple only reflect the last 24 hours. (IDEA FOR INDIES: get all your friends to buy at once!)

What you CAN'T do

1) You can not sell an album as album-only format without allowing the purchase of single-songs.
2) Can't search by record label, although you can see the record label on the album info page.
3) There will be no links from iTunes to your website, or to buy the physical CD.
4) Right now there are no sub-genres, only big genres. (rock/jazz/etc.)

About the deal to independents

They said "We're going to give you the same basic deal we gave the big 5 major labels".

Same deal. Same agreements. Same team of people. Same treatment, all-around.
"We have to be more efficient, though. We're not going to deal with 200 lawyers."
"Everyone is going to get the exact same deal. It's not negotiable. It's take it or leave it."

This is a reseller agreement: Apple buys at a wholesale price. Apple resells them to users. "No complicated or messy licenses."

Apple only deals with the partner/label. It's up to the label to pay the artists, writers, publishing, etc.

Rights are a 3 year term. For iTunes only, of course. This is totally non-exclusive.


IMPORTANT: the details will be mailed to me soon. They haven't named specific amounts yet. Instead, they had us sign a contract request form, and they'll mail the contract to us. That's when I'll know more.
EVERY artist in the store gets...
listed in new releases
found in searches (any search returns up to 250 songs for that artist)
in the "browse all artists" list (the text-based view)
an artist page (page showing all CDs by this artist, top downloaded songs, top downloaded albums, also bought...)
an album page: artwork, song list, top downloads, references to other artists
listed in cross-references to other albums ("people who bought this also bought...")

Marketing and Promotion

10 million customers have opted-in to receive a "New Music" email from Apple every Tuesday. Customers of iPod, iTunes, .mac, Apple eNews.
You can have a link directly on your site to point to your music on iTunes. (Of course the link will only work for people who have the iTunes software.)
Google has exclusive discounts for sponsored links into iTunes. Plus some personalized support.

Macs in 57 Apple retail stores are pre-loaded with playlists called, "Discover Indie Music". A chance at in-store play.

How to get the music to Apple

It's up to the partner/label to submit all the metadata (artist name, release date, song tiles, etc.), do the audio encoding, and upload the materials.
Every album needs to have a UPC Barcode!

You have to use their special Music Store Encoder tool for Mac OS X which will be released in 90 days or so.

Independent artists themselves, not with a label, can't use this. You have to go through an iTunes partner.

When asked if artists with their own label would be eligible, the iTunes guys had an odd answer, saying that this was invitation-only and they want to deal with those of us in the room.

****(CD Baby will be an iTunes partner, and will be glad to do the submission and be your pipeline into iTunes, if we can.)****

Apple Does:

Marketing & merchandising
Advertising, PR, Retail, Direct
30-second Previews
Infrastructure of download & delivery
Credit card transaction


That's all we know for now!
When I know more, I'll post it here.

Derek Sivers, president
CD Baby and Hostbaby


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