It’s a Business Model!

Posted byEthan DiamondPosted inUncategorized

In the past six months, you guys have used Bandcamp to sell over $1 million USD in music and merch directly to your fans. The pace of those sales is increasing rapidly, and last week we even saw an artist make it to the Billboard charts on the strength of her Bandcamp sales alone. It’s been awesome to witness, and we’re amped to carry right on, full steam ahead, building out new features, honing existing ones, strengthening our infrastructure, and generally making things better and better. Perhaps most importantly though, we want to do so in a way that’s sustainable long-term, and ensures that we’re here supporting musicians far into the future.

So, as long promised over in our FAQ, we’ll soon begin doing a revenue share on Bandcamp sales. Here’s how it will work:

Bandcamp’s share will be 15% of each transaction, dropping to 10% as soon as your all-time sales exceed $5,000 USD.

The revenue share won’t go into effect until early August. Until then, Bandcamp’s share remains zero. We’ve based the percentages on what works for the business and what many of you have already told us feels fair, but there’s still plenty of time for more feedback, so bring it (preferably in the comments below).

The revenue share rate for existing accounts will be based on all your sales to date. That is, we’ll look at your all-time sales and base your rate on that total. This means many of you will start at the 10% rate from day one. Note that we’ve just launched all-time stats, so you can easily see where you stand.

Your rate will be based on sales to your PayPal email address, not your Bandcamp account. In other words, if you’re a label and have five artists all using the same PayPal account, your rate will be calculated by looking at the combined sales of all five of those artists.

The basic service will remain free. Bandcamp only makes money when you make money. We considered building the business around advertising, but…well, OK, we never really considered that. We did consider building it around subscriptions, but under the subscription model, given the option of either developing a feature to increase your sales by 20%, or dinking around with service tiers to try to boost our subscriptions by 20%, we’d have to choose the latter. By building the business on a revenue share, our interests are perfectly aligned with yours: we only succeed when you succeed.

Questions, Answers

How will the revenue share work? We’re still hashing out the exact mechanism, but the money will continue to flow directly from your fans to you. Loads of you have told us how much you like that aspect of the service, so we’re planning to leave it that way. We’ll of course provide an interface for easily viewing all your transactions and the associated share split, and we’ll provide details of how the share will work by the time it goes into effect.

Do these rates include PayPal transaction fees? No, processing fees are separate. Those rates are here, including details of what you can do to minimize them.

How do your rates compare to the alternatives? We aim to give you a clear financial incentive to direct your fans to your Bandcamp-powered site first, so we’ve made our rates far lower than iTunes’, and very competitive with other music distribution sites. We won’t subject you to one of those competitive matrices that’s out of date the moment it’s published, but we certainly encourage you to do some research and compare (but pack your magnifying glass, fine print abounds in the music biz).

I am angry. What should I do? Leave a comment, we’d be happy to consider your feedback. If you are angrier than that, head over to your profile page and click the link that says “permanently delete this account.”

I am happy. What should I do? We’d love to hear from you as well, so please leave your thoughts below.

I desire an inspirational conclusion. What should I do? Read on, because we want to thank you all again for using Bandcamp. We’re honored to have been entrusted with such an important aspect of your career, and we couldn’t be more excited to keep cranking away on Bandcamp for a long time to come!

Update July 21st, 2010

Lots of great feedback in the comments, thanks everybody! A few thoughts, tweaks and clarifications in response:

Several of you suggested that new accounts should get their first $x in sales rev-share-free. We’re looking at the business impact of doing so, but also mulling over the fact that the cost of trying out the system is already $0 (no setup or listing fees, no charges for streaming or storage, every account comes with free download codes, etc.).

Some felt that the lower rev-share for high volume sellers was unfair to the little guy. We see your point, and may offer a Pro service option to high volume sellers instead. If you think you might fall into that category, please get in touch — we’d love your help defining what that option could look like.

For physical items, the revenue share will apply to the base price of the item only. It will not apply to shipping or tax.

While we’re still in the rev share’s early days, the rate on physical items will be discounted to 10%. It will eventually be the same 15% share as digital, but we want to get a few more of our e-commerce features done first. A few people wondered why there would be a revenue share on physical at all. The short answer is that Bandcamp is a music retailer. We believe that listening to music is critical to selling music, and the infrastructure to support that (web servers, bandwidth, actual customer care, etc.) is factored into our costs. Furthermore, we’ve already invested in a boatload of features to help you sell your music, features like download formats, sharing tools, stats, chart reporting, mobile goodness, download and discount codes, pricing flexibility, merch management…the list goes on. We of course plan to keep on developing the product in response to your feedback, and the cost of all that development doesn’t vary between physical and digital. If you don’t care about any of those features, if all you’re looking for is a place to host an image and a link to PayPal, there are definitely other services out there that would be a better fit. For the rest of you, keep telling us how you’d like to see the service improve, and we’ll keep improving it.

One or two people wondered whether they’d still be able to use the site to give away music for free. Yep, absolutely. Preliminary details on that are here.

There were also some questions about replacing PayPal. We intend to expand our payment options in the future, but we’re still a small (now seven person) company and that feature is getting prioritized along with every other mega-important to-do. In the meantime, our payment success rate (the percentage of people who enter the payment flow and then complete their purchase) already hovers near 70% (and hit 75% yesterday), which is excellent for any e-commerce site.

We’ll undoubtedly be fine-tuning the business model more as we go, so please take it all in the iterative spirit in which it’s presented. Thanks again!

146 thoughts on “It’s a Business Model!”

  1. It’s great to see you guys finding a good business model. I’m happy to share revenue if it keeps Bandcamp going, because the service is the best I’ve ever used.

  2. It’s about time! Anytime I talk about putting music online to anyone, my #1 suggestion for a home base is Bandcamp, but I’ve always secretly worried about where you guys will go when whatever money you were running off of runs out. It was super convenient that your service was free, but 15% (or less) seems completely reasonable given the services you provide. Best of luck

  3. Sounds like a great plan. 15% scaling down to 10% is a more than reasonable percentage share to keep an awesome service like this going.

  4. It’s certainly better than having a bunch of ads on the site. No one has any reason to complain, and everybody should feel lucky that it has gone without profit sharing for as long as it has. This is THE best service of its kind. One thing I would love to see, though, would be full Facebook integration. Is that in the works? Anybody?

  5. hey,

    you are SO welcome to your 15%. i have been up for paying you from the start. if only everyone we paid a % to worked as hard as you do, we’d be this happy about all of our payments to external services!

    please keep up the fantastic work, you have made what we do considerably easier and more presentable.

    you very much deserve to be paid for it.

    thanks again!

  6. I like it, but I feel like you should add your own payment service along with this, so I don´t have to go thought Paypal anymore. Because, honestly, I hate Paypal and I would much rather not have to deal with them.
    It would be really nice if you had your own interface, so people buying weren´t sent to Paypal and then back again. That would allow us to give the user a more personal buying experience.

  7. I’m very happy with this. In the very short time I’ve been using Bandcamp I’ve been very impressed – you guys are really doing everything right. A 15% share for what is arguably shaping up to be the best of all the online distribution services is very fair indeed, even generous considering the cut that others take. Good luck to all of us!

    -Miles
    http://www.streetlightfarm.com

  8. I was wondering when you guys would start taking a cut. And honestly, I’m totally cool with it. Bandcamp is an amazing service, and I’m more than happy to give a little bit of each album sale to ensure it’s continued existence and growth.

  9. If its all in the name of keeping what makes Bandcamp fantastic, then I support it. Bandcamp is easily the best platform for digital music, and I want to see the platform evolve and florish.

  11. Is it possible to provide a specific example. Let’s say I’m selling a song for $1 – how would this all break down?

    Thank you guys for your terrific site and service. Keep up the good work.

    Blessings;
    Dwayne

  12. Have you guys considered a lower threshold for revenue sharing? Like “We won’t take anything out of the first $500, then start taking 15% after that, and drop back to 10% after $5k”. The “it’ll probably be free for a while still” model is a good one for starving indie artists, and a notion of “it’s totally free up front” would help keep attracting people, I think. Costs nothing to get established, but the ones that start making actual money start paying actual money.

  13. I’ve been setting up a bandcamp site for Birds & Batteries, getting excited, and thinking to myself “this service is absolutely worth paying for.” Happy to support it.

  14. I suppose this means I have to change my prices… Otherwise, Since I hardly get any sales… When I DO – I’m going to be losing a chunk to Bandcamp.

    Now I just need to figure out how to calculate that out…

  16. @ Huepow (Dr Ear) I hope you’re a better musician than you are a mathematician 🙂 You sell an album for $20 and BandCamp take 15% – BandCamp’s share would be $3 leaving you with $17 minus PayPal’s cut of course which would be 2.9% + 30cents making it – I believe – 88 cents cut more out of your $20 so here’s the low down:

    $20
    – $3 (bandCamp)
    – .88 cents (Paypal)
    _______________________

    $16.22 is your pay (minus stinking state and fed taxes which you are responsible for)

  17. You guys are more than welcome to the $3.00 or so that you’d get from my sales 🙂

    But seriously, this is great. Like the commenter above, I feel like we can breathe a little easier, with the expectation that Bandcamp will be on solid ground for many years to come.

  18. I’ll happily share what we make with you, being that you provide by far the best solution on the web for artists to get their music out, and have made it extremely easy and accessible for both the artist to set it up and the user to listen, purchase and share our music. My hat’s off to you for creating this with the artist and listener in mind first as opposed to your wallets. THANK YOU!

  19. This is actually very good news. If you’re making money then you’ll (hopefully) stick around. Great service and well worth the percentage you will be getting!

  21. I’m fine with sharing revenues at those rates, but then can we remove %100 the BC branding from the bottom of the pages??

  24. It’s nice that it’s been free for so long, but I’m even happier that you guys are going to be sticking around for the long haul. I’m more than willing to fork over a percentage.
    You have the most user friendly, artist focused, well designed music site on the internet right now.

    I’m glad to be a part of it.

  25. While I understand that you need to make a bit of money on transactions or this great service will cease to exist, I am concerned about what constitutes a transaction on physical products. Do you take your cut on just the base price, or does the shipping cost factor in? If it does, I might have to raise my shipping costs to cover, and I’m not happy with that.

    I also think a 15% cut of physical sales isn’t fair. While selling and delivering downloads consumes your resources, selling and delivering a physical product still relies mostly on my resources. I think a reduced rate on physical sales would be more appropriate.

  27. This is absolutely fair, and like many here. I would much, MUCH rather give up a few cents here and there in sales for such a wonderful and responsive service.

    One question:
    Is “all time sales” on an artist by artist basis? Or, if you have multiple bandcamp accounts does it aggregate for those as well?

  28. If 15% is the cost of keeping this site around for as long as possible, I will happily pay!

  30. I personally would like to see a few things polished though before I’d consider staying. Better uploading that doesn’t go slow as haydes and/or cut off mid stride. Not a big issue if I could resume. This is easy to blame on my connection, but in all fairness its not the problem. A nice queue system for uploading full albums (See last.fm) instead of going through each song over and over. This is hell for labels. Ask my label owner about it.

    Also Paypal needs to be an option but you need to do something else. If you decided to transfer the funds into Paypal afterwards, thats fine, but understand this: Paypal uses an authentication that requires a physical address to match the card source when one is used. This sounds like its meant to be secure but its actually a bane to even some bank’s debit cards(aka mine). Its almost impossible to use a pre-paid or a gift card with Paypal in most cases. This is limiting my customer base. I have to tell them to go to Itunes instead and that defeats the purpose of having your service. As I said I can’t even use my OWN card with Paypal..why do I want to pay YOU to use it?

  31. I agree with “psycliq”s comment…for users who may only make a small number of sales per month, 15% is going to be a much greater burden than users who are making $1000 of dollars…seems a little unfair…of course, FoxNews would claim I’m a secret communist for this kind of talk…I do like his idea of making the first $500 worth of sales free of charge…this would make a HEAP of difference to struggling new bands where every penny counts

  33. Like so many others have said, 15% then 10% seems very fair. Bandcamp is hands-down the best service I’ve used. I love that there are no plans for irritating banners anywhere too.

    The comment for the first $500 sales still free, then 15% sounds like a good idea too. Even if it was a lower amount, say $200, I think you’d draw newer users.
    Although, as it stands, I can’t recommend Bandcamp enough – even at a 15% cut.

    Initially I thought Bandcamp’s own POS service to replace Paypal would be good, but Paypal works very well. Why mess with a good thing?

    I think the last thing any of us want Bandcamp to become is another MySpace – something that tries to do everything, but nothing great.

    That being said, it would be great if Bandcamp had an option (in the banner bar) to link to other sites. Like Tumblr for the blog, YouTube/Vimeo for videos, Flickr for photos, etc. Something that was easy for users who aren’t so great at web programming to use Bandcamp’s header as a central hub to useful sites.

  34. How are you going to deal with download codes? you gonna treat them as free, right?

    Also, as mentioned above, I would like to see some entry package for low-volume artists. Like first 50 or 100 sales could be free and then you can charge your fee.

  37. Seems like a totally reasonable fee to me. I’m not sure how it compares to Amie Street, which is the other place I have my music up for sale, but I appreciate that your model will start passing money to the artist immediately rather than waiting to make up your costs first.

    On the other hand, I had 10x as many downloads and listens within 24 hours on Amie Street as I had in a month on Bandcamp. Any plans on building out more on the music discovery front, instead of just browsing by tag?

    1. > Any plans on building out more on the music discovery front, instead of just browsing by tag?

      Yep, very high on our to-do list, thanks Dan.

  38. I’m all for this.

    Personally, I agree with some of the people that would like a bandcamp POS so that we don’t have to go through paypal. That would save your users from giving a chunk of money away to both bandcamp AND paypal. I don’t mind giving a cut to bandcamp as it’s well deserved but paypal pretty much sucks.

    I also think it would be cool of you to not take a percentage out of sales until they exceed a small amount of income such as $100 or so or something. That way it’s still a free service initially and then, once the first larger chunk of money comes in, you start taking a share.

    Other than that, keep up the good work.

  39. Seems fair.

    My question: My band intends to use bandcamp only to give away music.

    Do you anticipate a continuing willingness to accommodate people like us?

    Some small yearly fee for our kind would seem fair to me if necessary.

  40. I’ll be a dissenter and say that I think it’s too much. Bandcamp does provide a great service and I will continue to use it but I do not plan to keep it as my main personal store. 10%-15% is far too high for a service that is basically one-size-fits-all and requires little labour per artist on your part. If you would make it 5% everyone would be on here and you could overtake iTunes in time. It would make no sense for anyone to operate their own store in that case. I plan to start up my own store now, but I would switch to a Bandcamp competitor that charged a reasonable rate. Take a page from Tunecore – if you have little variable costs, you should not be charging a high percentage. It’s not fair. Even if it’s less unfair than iTunes.

    Also, the earlier comment about physical releases is spot on. You should not be collecting anything for that, although a tiny percentage could be less objectionable.

  41. I’m happy. I have a bandcamp for my band. My band is so tiny that we have to give away our music in order to be heard. So we are one of those bands that don’t give bandcamp any revenue.
    I’m so happy with bandcamp’s service that I would donate some money if I there was a way to do it. Have you considered letting bands like us making donations as a way of earning some more revenue?

  42. 15% for me seems just a tad bit high because as a label, we’re not selling very much. Just a few every month.

    And how will this work for artists who use the “Pay-what-you-want” model?

    1. Hi Mark, you can sell your music for whatever price you like, or let fans name their price (with whatever minimum you choose), and the revenue share is a percentage of the sale, whatever that may be.

  43. After reading all the comments I agree with two really smart suggestions made by other users:

    -0% under $X sales, 15% over that, 10% after $5000. Not sure what the price point would be. Maybe a trial period, something like that. Either way this encourages new users and gives folks a chance to see whether the system works for them or not without ‘risk’. I guess the worry however would be people making multiple accounts with different paypal accounts thereby taking advantage of the rule.

    -Smaller percentage on physical sales. BIG TIME AGREE WITH THIS. The back end for the digital stuff is AMAZING. The conversion, the players, the embedding. But physical sales do use few of your resources and tons of ours. It almost makes me consider using bandcamp only for digital and have all physical on my site so I can keep the profit margin necessary for physical given the costs of manufacturing. Though, again, I can see how people might take advantage of this: list something as having a physical copy with a note saying you won’t actually receive anything, then people download the release files that ‘attached’ to the physical version.

    I understand the desire for simplicity and avoiding all the ‘policing’ these options would involve, though I’d like to believe people would ultimately be ‘good citizens’ and recognize that such a quality service desires a cut. It would be a serious tip of the hat to consider them.

    Thanks, love the service like everyone else!

  44. You know, of course it’s a bummer to an extent but honestly I find Bandcamp to be the most user friendly, clean, easy to use website. No one provides service like you guys do – everything works and everything just makes sense.

    I’ve been a long time promoter and activist for Bandcamp and will continue to be so. Just please don’t ever do the ‘pay more for xxx service’ model. I’m down to give you guys the flat fee but if I have to pay extra for every little thing it becomes too cumbersome and too expensive.

    -Zen

  45. Digits posted while I was writing mine, he makes a valid point too. It’s a high percentage given the limited amount of editing one can do to the layout and how little involvement it is on your end now that your ‘code is written’.

    And I think he’s right, charge a lower percentage and you’ll have a flood of people switch over to BC, iTunes and all that would be useless.

  46. 15% is absolutely OK by me. It’s much less of the selling price than the distributor/shop makes selling physical CDs even, and i’m happy for you guys to get your cut.

  47. First, thanks… you guys deserve a decent business model; given the resources you’ve put into this. It is cool of you to allow us to be part of it.

    I share psycliq’s sentiment:

    “Have you guys considered a lower threshold for revenue sharing?”

    This helps keep art and commerce in balance, which I have found to be a useful aspect of bandcamp so far: Present your art and if the masses come a callin’, sell it and help your benefactors. If the masses don’t come around en-masse, well… at least your art was available to those who appreciate it; without the heavy burden of infrastructure (Thanks bandcamp!)

    I also agree with the strategy of establishing an independebt POS. Perhaps as revenue flows from this change, some could be re-invested in the infrastructure necessary to make an independent POS service happen. Then the entire bandcamp community can share in the benefit of streamlined operations (i.e. no paypal fees) having helped fund the new infrastructure to make it happen.

    Digit’s “dissenting” comments are food for thought… as other models enter the space, bandcamp could already be set for growth by attracting revenue-bearing members via a smaller percentage.

    Off the top of my head the only option that comes to mind that hasn’t been discussed is an option to pass on the fees to the end user… I guess that can be accomplished by setting your price to absorb, but it might be an nice option to allow the buyer the option to help pay ‘administrative costs’.

  48. No charge for the first $500 of total (digital + physical) sales and 10% thereafter would seem equitable I’d think.

    It’s a fine line between encouraging increased sales (to reach a lower tier) and discouraging use at all.

  49. You guys do a really wonderful job at the whole digital download thing, but I really don’t like the two-tiered pricing along profit lines, where the people that make the most pay a smaller percentage. I’d be much happier if it was just a flat rate, be that 10% or 12% or 15%.

    The points about physical sales are well made too, and I think they warrant a smaller cut than sales that include a digital download.

    Even under the possible exploitation pondered by 4eyez, this would use less of your resources than a proper digital download because the artist would have to provide this functionality themselves. It should be made obvious which purchases come directly from bandcamp and which are provided through the artist, anyway.

    Enable the Customer, Empower the Artist, Conquer the World!

    You’re doing a good job and I hope you can refine your business model as readily as you have improved the rest of your service. 🙂

  50. Seems like you should have your own payment processing system set-up before asking for this kind of cut in sales… Any plans beyond providing a Paypal link?

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