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FROM THIS EPISODE

This is Celia Hirschman with On the Beat.

Most of the record industry has been trying to figure out how to make money in this declining market doing the exact same things they've always done! Smart executives realize consumers will never accept the old ways of doing business. A new pair of glasses is in order.

Adventurous entrepreneurs and visionaries are seizing the day. One of the more interesting ideas to come out of this digital revolution is the "open source" record label. Open source labels are a reaction against the enormous legal morass intertwined with copyright laws that bind the artist, label and business. Rather than force artists to abide by current copyright standards, most open source labels have adopted a Creative Commons license to sell and share music. A Creative Commons license allows the creator and the manufacturer of music to set new terms on how that music might be promotionally and commercially exploited.

Beyond the issues of copyright, some open source labels have taken on novel ways of running their business. One of the biggest labels of this type is Magnatune. Magnatune was started by dot com entrepeneur, John Buckman, in Berkeley, California. Perhaps because he wasn't from the music business, he could see things a little differently.

And it is different. Magnatune allows you to stream all the music on their site whenever you want, free. When you want to buy a digital file, you can download it in any format without DRM. This means you can download WAV files, which are virtually the same as CD. High resolution artwork accompanies the file downloads.

They'll also print you a CDR to order if you'd prefer. But don't look for their artists at retail stores. Magnatune feels that since every computer has a CD burner, and with the cost of a disc less than 70¢, trying to sell CD's at retail is a problem. Plus they cite the added cost of distribution, marketing and -- I'm being nice here – they are far more direct about their disapproval for the traditional business.

Another interesting thing is that Magnatune releases music from artists non-exclusively. Artists can sell their own CD's, compete with the Magnatune website and even sign with another record label for the same album. Magnatune doesn't care about exclusivity, and there's no time limit on the contract. They like to say, "If you want to part ways, don't send us anymore music."

Profits are split 50/50 with the artist, and unlike record stores who set pricing based on consumer demand, Magnatune determines pricing based on whatever the consumer want to pay. You can pay anywhere from $5.00 to $18 a CD. Your choice. Just know that 50% goes to the artist so they ask you to be generous.

There are over 540 albums on Magnatune right now, and the bigger sellers average 2K to 5K copies. But the real money is earned from music licensing. Magnatune serves as a warehouse for licensing for films, television, advertising, games, internet sites and music on hold. Magnatune and the artist split the profits.

The reality is the record business is reinventing itself every day now. It's a necessary step in the evolution of a culture shift in lifestyle. Magnatune is one of many record labels hunting for alternatives.

This is Celia Hirschman with On the Beat for KCRW.

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