It’s a Business Model!

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. Don’t ever increase the fee and I think you’re onto a winner here. Bandcamp appears to be the epitome of simplicity. Best of luck πŸ™‚

  2. Mid-august would be when i plan to release my 7 song EP. Just my luck. But you know what I would rather take a percentage cut right now while I’m still becoming more known than pay a yearly fear or something similar in which i’m not sure if I’ll make much. I think the % under X amount is good, then 15% but no big deal. but I do think that for physical things it should be at least less of a percentage.

  3. I think comment #16 got it right:) and those that think 15% is too high must think this through (physical sales aside).

    I produce an album at our studio. I plop my big butt down in the studio office and spend a little bit of time producing my BC page, I few more minutes uploading those songs, PayPal takes care of the cash transactions and I didn’t have to move my big butt out of my studio office’s chair. Instant distribution, instant cashier and mass marketing all without having to leave my comfy office! No gas, no talking with venues to see where in the snot I can post a poster. Also, since some of my income derives from website development, I can appreciate the expense, resources, staff that goes into producing something like BandCamp.

    Now granted, I do love that starving musician mentality of not charging until you’ve reached X number of sales dollars. Either way, I’ve enjoyed and promote BandCamp to other bands. Keep up the great work…it’ll all work out!

  4. Why charge the little guys more than the big guys? It’s hard enough getting started as it is – most of us will never reach $5000. 10% flat rate on everybody is my vote, with no charge for generating download codes, and no charge on physical packages that don’t include downloading.

  5. Everyone here is cheering for bandcamp saying they’re going to start taking their money. I’d like to know their secret.

    That said, 15% is not reasonable. That is far higher than any online sales site I’ve ever seen. It’s almost twice what iTunes charges. Drop it to 7% and we’ll talk.

  6. I agree with a couple of comments above regarding the regressive nature of this….Not that I have a problem with the taking a cut concept, but by giving the artist who sell more a discount, your set up is regressive against those who are doing smaller sales numbers. If, instead, you had a flat rate for all somewhere between 10% and 15%, you will, it seems, make as much or more money without having as large an impact on the artists with the smaller income.

  7. Ugh.

    I’m not really pissed that you guys are starting to charge a fee, as I understand why you’d want to, but:

    1) I wish you gave more warning. I just moved my entire record label’s catalog to bandcamp out of a store I hosted myself, and I wouldn’t have done so if I knew this was going to happen.

    2) The fee seems steep to me unless you’re offering REAL credit card payment options. Paypal scares off A LOT of customers.

  8. i love you guys, and you know that. you guys have done so much for music, and this is peace of mind for me that you guys are going to be able to stick around. thank you! <3

  9. I think Bandcamp absolutely deserves to get paid for their work on this awesome site. That’s a given.

    However, and it’s been said already, but I don’t understand why you’ve chosen to penalize new or unknown bands by taking more of their income (15%). That doesn’t make sense to me. It’s not like you’re doing more to upkeep their accounts. We’re all on a level playing field here, right? It should be 10% (or 15%) across the board and leave it at that. Anything else strikes me as unfair.

  10. I love Bandcamp, so does everybody and so does Omar Rodriguez-Lopez.

    Yet, I have to agree with some people’s comments and concerns that are well summarized by Comment #42.

    1) 0% cut unless an artist makes $XXX.
    I think some people would feel more ready and more comfortable sharing the sales with Bandcamp once they have sold a certain amount.

    2) smaller % cut for physical sales.
    While we are all happy that now Bandcamp can start making money, and we all know that you worked your butt off to make the physical sales thing possible,
    I think we’ll be happier if it takes a smaller cut from physical sales than download sales.

    But in any case, I love Bandcamp.
    Thank you.

  11. 15% is both fair and profitable. As long as you dont bring in a minimum price. If this works then this is the future of the music industry and its looking very bright.

  12. Well I understand everything about business being business. And I do appreciate the quality and all the features of your site.

    What I find sad though is the fact that small time artists will once again end up paying more than big shots.

    Just think about it. Someone just starting up, who is excited about selling even one or two CDs ends up paying a larger percentage on their sales than someone who could actually afford it since they are making a substantial amount of money from the sales. (Plus the PayPal fees as before.)

    Once again. I understand the business side (I have a BA in business so yes I do), but I can’t say that I agree with the human aspect of it.

    I guess I am just more likely to go along with what was called here as the “starving musician mentality”. I believe that not charging artists until sales reach some number X that you guys set would make much more sense. You would still have a large inflow of artists that are starting up and are looking to establish themselves online. And then when they manage to get bigger they stick with you since all the fans already know about the bandcamp page and since it’s an awesome service. So in the end they get the money to start growing and you guys get yours once they are a bit bigger and bringing all the traffic to your site.

  13. Oh yes, digital downloads you deserve a cut, most definitely. You’re providing a great service.

    Physical goods and postage should be treated differently. No cut, seriously. Zero. If we don’t include a digital download then there should be no charge, since we’re not using your service for that sale. That’s fair.

    And if you’d asked me to guess what percentage Bandcamp would take before the announcement my guess would have been closer to 7.5%. But what do I know?

  14. Bandcamp have to take a cut – anybody who expects a service as brilliant as this for FREE is out of their fucking minds…the Freemium model appears to be on the wane. Good. I am more than happy to pay for excellent, clear, concise service.

    If the service was pants I’d be off – but it isn’t, it is far away the best distribution model I’ve ever ever used and anybody who uses it SHOULD be giving up a percentage.

    The cult of everything for free is not a sustainable model. Bandcamp would die, bands will die.

    One good thing to have come out the Freemium mess is that a modicum of quality has returned to people’s minds – they will only pay for something if it represents outstanding quality – this is the way it should be, not just blindly accepting crap.

    Bandcamp falls under the banner of a service of outstanding quality; we all need to contribute to keep it and ourselves going.

    Who knows, maybe there will even be a major cultural shift in the majority of the record buying public to buying direct from the artist being seen as the way forward!

    Kudos and keep up the excellent work.

  15. at 15% nobody offers the same kind of service that bandcamp does. It just makes perfect sense and I’d expect nothing less from them. The support and infrastructure the online sales are built on pays for the 15% without even getting to the love and thought put into the way people can buy our music quickly, securely and in any a range of qualities. BUT the best thing about all of this is bandcamp is giving power back to the musician to sell his music fairly, that in itself is priceless. the balance is thought out the website works, the artist and the bandcamp, win – win. If anybody needs some support about marketing their music and how we get it out there to keep our sales so steady, let me know. happy to help. knowledge is power. Peace CAde… from the Dub Fx Crew!!

  16. I always thought that your business model wouldn’t charge everybody, just those who were makin real money through bandcamp.
    That is the idea you guys gave when i signed and I ask you to reconsider a minimum monthly sum of money before asking for your well deserved pice of the pie.
    Thanks!

  17. Fair enough, no problem at all. But I would like to echo the concerns of comments 39 and 41: What about bands that don’t generate any revenue for you, or that give away their stuff for free?

  18. I don’t have a problem with paying for the service but I agree with some points already made. Mainly that 15% for the sale of a physical product is far too much. Bandcamp offers nothing towards that sale.

    I also agree that you should seriously consider cutting PayPal out of the equation. I distrust PayPal immensely and the doubling up of fees starts to make a Β£1 sale far less attractive to bands than it is at the moment.

    Finally, if I am paying for the service, can I have the option of having my streaming mp3s truncated or static inserted (etc) so people cannot come along and hijack the audio? It’s all very well offering full, free songs but what’s to stop people ripping them? Nothing at all. An option to (for example) insert a static blip ever 30 seconds would keep me here long term. Otherwise I’d consider looking elsewhere.

  19. I’m very impressed with Bandcamp, and I think I understand something about the amount of work and costs it take to produce. However, I think 15% is too high. Perhaps it’s ‘competitive with iTunes’, but that doesn’t say much, right? I think that’s higher than CDbaby, even. I’m in agreement with the poster who thought it should be 5%.

    I want to pay Bandcamp for the Bandcamp service, but I don’t want to feel like Bandcamp is making money off of my love and labour. The 15% on physical package sales seems more egregious. 15% seems especially wrong when one considers the future potential of Bandcamp.

    Speaking of future potential, I know that I would appreciate more transparency as far as your business plan is concerned, since we are now ‘partners’. What are Bandcamp’s future growth projections? Who’s funding Bandcamp start-up costs? Not that I’m suspicious or anything. I’d just like to know.

  20. Fair enough but do consider the physical sales argument there is a point there

    … Oh and please don’t sell out to an Internet giant

  21. if you are banking 5k or more off of bandcamp then a 15% cut is pretty reasonable if you ask me. Great service and it doesn’t effect us up and comers πŸ™‚

  22. It’s great that you guys will take a cut….it really is. You deserve it for the service you’re offering. It would be excellent if you offered a way to deposit the funds directly to bank accounts instead of you guys taking a cut and then paypal taking a cut after that. I’m tired of giving paypal a percentage of the music we make. Any ideas on that.

  23. I completely agree with comment #42. It is clearly stated, so I’ll just summarize by saying that while I’m a big fan of Bandcamp, I find 15% too steep for a band with less than $1000 in Bandcamp sales and a 15% cut on physical items isn’t cool.

    What about 5% until a band reaches $500-$1000 and 5% on physical items? Just throwin’ around some ideas… You know what would possibly flip my thinking? A label page with a cart option. A cart for physical items would make the cut for physical items more reasonable. Especially if there were a way for the physical items to appear with a picture on the main index page.

    Thanks for creating, maintaining, and expanding such an impressive option for bands. I’m excited to see where Bandcamp is headed…

  24. I actually think 15% is way too much. Especially considering Paypal only takes ~2,9% and manages to keep their service going. Yes I realize they have alot more users, but they are also considerably bigger firm with more expenditures (does it matter who owns them or if they were an investment? They still have to be profitable in light of everything and they are). Around 5% flat commission would be fair I think. Why would you want to have a diametrically progressive solution where you actually take more from those who have limited sales than from those who have many. Bandcamp is great and all, but come on. Don’t go corporate on me. πŸ˜‰

  25. I am so glad that you guys have set up a sustainable business model that makes sense and is fair all-around!

    I love this site and never want to see it go away.

    I especially love how everything is still free until you start making money which is quite honestly a great way to build loyalty and has completely won me over.

    Thanks and good luck with the business!!

  26. Like many others I’d also like to give my compliments for the brilliant service. I like the suggestions that it would remain free for sales under a certain amount, be it even 200-300$. But in any case I will continue using bandcamp. Thanks.

  27. Some of us on the Cubase forum are interested and enthusiastic about Bandcamp. Some of us have Bandcamp sites. Also http://www.haiti.bandcamp.com has been the distribution hub for a charity we’ve been running since the disaster. Therefore I’ve extended the discussion to:

    http://www.cubase.net/phpbb2/viewtopic.php?p=998794#998794

    As far as I am concerned, giving you 20% up to $5000 and 10% thereafter is perfectly fair, and I am fascinated by the perspectives and suggestions posted in this list of comments.

    I thank you for all that you and your colleagues have been doing.

    Best wishes
    Glyn

  28. You should really clarify your position on hosting non-sales music. One of the best features of Bandcamp was that it was a professional way to host albums that just needed to get out to people, no money involved. If you’re planning on keeping it free to use for free tracks, that’s great. If not, you should state your intentions.

    While it certainly might be attractive to smaller artists to have some minimum total sales amount under which no percentages are taken, the reality is that hosting all those smaller artists really does incur a significant cost. Allowing them to hang on for free means that the larger players are subsidizing their existence. Keeping the percentages even across all accounts lets everyone pay for their share.

    The only counter argument I can see to the physical package fees are that many of them include digital downloads. It does seem odd that purely physical packages like t-shirts would incur the same fees as digital downloads. I imagine this is done to make up for hosting expenses elsewhere and to discourage gaming the loophole. Some comment on this topic would be enlightening.

  29. While nearly everyone here seems to agree some sort of cut for bandcamp seems fair…What about the little guys.

    We’ve had whole album sales go straight to paypal. If we have bandcamp taking a further cut on our meagre sums it will seem like we’re going backwards.

    You are gonna have to do something like someone mentioned earlier and do the first 100 sales for free.

  30. This is bullshit. I boycotted iTunes and practically every other service because of this. Who the hell do you guys think you are taking a cut of musicians music without paying us an advance? You will become the most premier music service this year but I will not be a part anymore. Other independent musicians such as myself should feel the same disgust as I do.

  31. I’m not likely to see much from my site, however I would like to think that some day I might, I won’t stick around if there are ads creeping in, I would not be against a small yearly subscription to help keep it that way. If ads are coming for non-sellers, then I am out of here.

    I agree with those who say that small volume sellers should perhaps be given the first few sales for free, then the model applies… and also agree that those selling physical items should be given a lower rate.

  32. The scheme is a big pity for small time artists. I remember reading some time back that the business model planned for the future was rather more radical in that it would be primarily drawing revenue from the top selling artists and leaving all us paupers free. Pity it’s gone the way of every other site in slugging the ones who are making little cash the worst. I still like the site but am disappointed that I have promoted it so hard to small artists and now this.

  33. Sounds great. Like commenter #6 above, I’d also be happier if PayPal were eliminated and you had your own in-house payment system, but I’m fine with what you’ve proposed in any case.

  34. Agreed – 15% on physical sales is a little onerous considering the almost nil resources you use/supply to manage that on BC. 15% of digital is more than fair, given how awesome and simple it is to use the service. Also, making sure the uploader is kink-free has to become a priority… Nothing more frustrating than re-upping tracks….

    Keep up the awesome!

  35. I’m going to venture and say that Arch Valenz is being sarcastic and joking, but if not, then please do go and good riddance. Nothing in life is free. You wont get far with that attitude.

  36. Free was great… but 15% is entirely reasonable. It is cheaper then what the crooks over at Amazon want, and I’d much rather support an independent business that is helping small artists like us find an avenue to release and distribute our music in an easy and effective format. I will gladly give you my 15%… its not a lot of money, but I hope it will help the wonderful entity that is bandcamp grow. thank you.

    …but don’t raise it past that! πŸ™‚

  37. Thanks for the comments everybody, we hear you and are mulling what seem to be the recurring themes.

    About PayPal (@justin, @dan, @michael, @claire, @JP, @Tony): it’s a fairly common misconception that if a service only implemented its own payments system, PayPal fees would disappear and there would be more money to go around for everyone. The reality, however, is that payment processing fees are unavoidable. That’s why Google Checkout, Amazon Payments and even a super hip, they-clearly-get-it payments 2.0 company like Braintree all have similar fees to PayPal’s. We still might take credit cards on our end in the future, but it’s hardly the panacea that some people are hoping for. Also, our payment success rate (the percentage of people who enter the payment flow and then complete their purchase) already hovers near 70%, which is considered very good by the sorts of people who track such things. Finally, don’t forget that Bandcamp accepting credit cards means the money no longer flowing directly to the artist, which is something we know many of you love about the way things work now.

  38. 15% is the industry standard for a starting rate. That’s seems very reasonable. Digital distribution will cost you that much unless you’ve got some incentive to get it lower – like a 5000 song catalog.

    My only question has been asked already. But at this point I can only assume that since “we make money if you make money”, we can still give free downloads.

  39. @john, dudewithsomemusic, elbybrass and yintan:

    > My band intends to use Bandcamp only to give away music. Do you anticipate a continuing willingness to accommodate people like us?

    We think free downloads have a real place in the big picture of a band’s career, so yes, definitely. However, some artists have used Bandcamp to give away hundreds of thousands of album downloads. That’s fabulous and we want to support it, but of course there are real costs associated with doing so, and continuing to do it for free would have a negative impact on those selling their music, or giving their music away in more typical quantities. So in about a month we plan to give every account a good number of free downloads, beyond which you’ll be able to purchase more. This isn’t an area where we expect to make money, we’re just making sure we cover our costs.

  40. I think the move is extremely fair, and will continue to use Bandcamp for my direct-to-fan campaign. I think it’s high time they get something back for running and maintaining such an easy to use, not to mention highly pofitable, site where artists like me can bring their product to their fans directly. They also LISTEN. That’s key to maintaining any successful venture. They listen to what people want. GO BANDCAMP!!

  41. Bandcamp: I love you. Your services have been fantastic and are completely worth paying for. Text is a strange medium so please know there’s no snarkiness or attitude behind my thoughts and questions.

    Would it be possible to offer an annual flat fee alongside the percentages and let us choose? That way if we don’t make the money to cover the cost of the annual fee that’s our choice and we have to live with it. You gave us an option and we chose poorly. Not your fault and you can sleep with a clear conscience.

    I’m looking at this from a place where I actually have made some money and to do the 15% (then to 10%) wouldn’t be the most ideal financial option.

    For example, my cheapest option (READ: Not the best option) would be to go with Nimbit. They offer very similar services and they offer them with an annual fee (only). They also aren’t nearly as sexy or easy to use so there’s some give and take.

    TopSpin is so exclusive that I have no clue what goes in their tree house.

    Also, if there was an option to create sub-stores (i.e. T-Shirts, Vinyl, etc) that would make things WAY more appealing.

    Thanks for your services. You’ve done a lot for me and I want to stay but part of being a musician in this DIY climate is managing your finances responsibly.

  42. @Ethan Diamond

    Oh man… Fine print will get you every time. Thanks for pointing that out.

    Thanks for the quick response and the open-mind.

    I’m also aware that I’m in a unique place (a 5 EP project over the year) and in a weird middle tier where I’m having small success but enough for the 15% to affect me.

    Thanks for understanding.

Comments are closed.