With more than 1 billion mp3 downloads logged in 1999, clearly the Internet will be an important part of the music industry's future distribution plans. Though direct revenues from this revolution have as yet remained elusive, other, less direct revenue opportunities are easier to see. One example is online "affiliate" retail, which draws on the current $1 billion market for online sales of physical CDs. This new breed of retailer, the "virtual storefront," allows independent artists an exciting new way to sell CDs without the need for traditional retail distribution or radio play.
The prevalent examples of virtual music storefronts include fan sites, amateur music enthusiasts' homepages, and Internet radio stations, and each have affiliate relationships with online media distributors like Amazon.com and CDNow.com. Analysts such as The Carmel Group and Paul Kagan Associates project that up to 25% of music sold on the Internet in the year 2000 will be sold through affiliates.
The virtual storefront is a completely different animal than traditional retail. Because they draw traffic from a sense of shared interest rather than traditional retail's physical presence, virtual storefronts work easily with music and artists that are part of a "scene" or niche musical community. In turn, virtual storefronts can offer these independent artists an important and unique means for increasing their online record sales. Online sales are even more attractive to artists because they can keep a much greater percentage of total revenues than through traditional retail outlets, and almost any artist can list their product in online catalogs like CDNow.
The example of a virtual music storefront that is closest to my heart is the company at which I work: UnicycleRecords.com. Unicycle is a hybrid online record label. By that we mean that Unicycle publishes its own original content by recording and releasing singles -- "Morning After Singles" -- of live performances from touring indie artists at signature independent clubs like San Francisco's The Bottom Of The Hill. While this content generates revenue on its own for both Unicycle and the artists through sponsorships, custom CDs, compilations, and digital downloads, it also generates traffic to the Unicycle site.
A significant portion of Unicycle's business comes from channeling traffic to sell other music and merchandise from the profiled artists, just as a brick 'n' mortar retail outlet would, through affiliations with various "back-ends" including CDNow, Amazon.com, CDBaby and Insound.com. Unicycle's model, like many other virtual storefronts, must support individual scenes or communities, since these groups go a long way towards generating a large chunk of the site's traffic.
Who knows how the whole game will shake out, but virtual storefronts so far are a fine thing for artists. They mean that niche artists who often do not have access to mainstream radio or traditional music distribution can use this type of community-of-interest-based online store to boost their own record sales significantly, without the necessity of having to clear the barriers of mainstream media support and distribution.
