Ethical products are worth more

Coolfer has an interesting blog entry about applying the lessons from a Wall Street Journal article, which showed that people are willing to pay more for ethical products.

Meanwhile, as the numbers show, the unethical group was demanding to pay significantly less for the product than the control group. In fact, the unethical group punished the coffee company's bad behavior more than the ethical group rewarded its good behavior. The unethical group's mean price was $2.42 below the control group's, while the ethical group's mean price was $1.40 above. So, negative information had almost twice the impact of positive information on the participants' willingness to pay.

In the music industry, the "negative information" is all the RIAA lawsuits, DRM, and all-around bad publicity.

Our survey: download membership was going to be popular

Here is a 3 1/2 year chart showing CD sales as a percentage of our album sales:

The blue line is the weekly number, while the black line is a moving 3 month average. The trend is certainly clear: CDs, especially in the past year, are declining quickly.

I'm not sure how to reconcile our sales numbers with the results of our recent survey, which showed 45% of respondents to might be interested (18% being "sounds pretty good" or "very interested") in a "CD Club"

Also note that in this survey, only 39% were possibly interested in the streaming membership (as it was explained in survey), while 71.4% were interested in the download membership, which is one reason I'm optimistic about the future.

FYI, the survey had 600 respondents, which is a good enough size to be considered valid.

-john

Magnatune Memberships : the only "all you can eat" DRM-free music subscription service

A few days ago, the Magnatune home page changed and began offering all you can eat memberships for a monthly fee. I didn't announce it on this blog right away, because I wanted to make sure there were no problems with it and also to see what everyday visitors would make of it (and how it might affect our sales).

The best explanation of the new membership offerings is at this page:
http://www.magnatune.com/compare_plans

I've written two quite extensive FAQs for the two kinds of membership plans, which should hopefully answer most questions. I will of course update it as new things pop up.

In this blog entry I'd like to give you some of my preliminary analysis of how the membership offerings are going.

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Preliminary results

Currently, almost everyone who is signing up for memberships is going for the pay-three-months-at-a-time download membership. We are selling enough of those every day to represent 150% increase on daily revenue (that's without announcing it, just converting everyday visitors). That's really tremendous, and I hope that keeps up.

The numbers should get even better in the future, because right now we have just started the service and thus there are no renewals coming in. In three months, each day we should have new members signing up, but in addition to that some percentage of people who signed up three months ago will be renewing. Our task will be to make sure that the Magnatune membership is compelling enough that people want to renew after their three months have expired.

In the first 12 hours after we announced the membership feature in our newsletter, 15 people signed up for download memberships (that's when I'm writing this blog entry) and one streaming-membership for 3 months ($27). One of those bought a lifetime membership ($294), all the others are three months at a time ($54/every-three-months).

Of those 15, four of them (27%) are people who have never bought from Magnatune before, which I am particularly pleased by: this means that we're reaching an audience who otherwise was not interested in what we were selling them. Six of these people (40%) were frequent buyers, having bought between 8 and 12 albums in their history with us. One person had previously purchased 24 albums (appropriately, the person who bought the lifetime membership). The remaining 4 people (27%) had purchased between one and four albums previously. (update: after 24 hours, we sold 24 memberships, of which three are lifetime-download-memberships [ie worth $882 !])

The minimum fee for the download membership is $54 (this gives you a 3 month membership), and this represents approximately 7 albums at about $8. That means that even with the 40% who were already frequent buyers, Magnatune does okay. Granted, the average for that heavy buyer group is 10 albums, or about $70, so if most of them cancel within three months, then we are down $16, but I doubt that most of them will actually cancel. They are probably joining because they like downloading lots of things from us, that's why they've previously purchased so much.

Declining Conversion Rate

Our "conversion rate"--the number of people who buy divided by the number of people who visit--has been declining steadily while our audience size has been increasing. At this point only one person in 300 who visits Magnatune and listens to music actually buys. When I started Magnatune the ratio was 1 in 32. This means that we need to do a much better job of converting people who enjoy listening to our music into people who support us financially.

One reason I think people have been decreasingly likely to buy over the past five years, is that more and more people listen with their computer and not with a dedicated hi-fi and CD player, something that was not the case when we launched. What this means is that instead of evaluating our music on their computer in order to buy it and play it on their hi-fi, people simply listen to the free versions forever. I'm fine with a certain amount of that, but bandwidth is expensive, and I created Magnatune to build a business model to help musicians survive, so at some point some percentage of people need to buy in order to keep us alive.

I've found that Amarok and Rhythmbox listeners, for example, are extremely likely to purchase, while people who listen to our radio stations on iTunes or our podcasts are extremely unlikely to buy. That's probably a function of both the demographic (Linux users are much more into our philosophy) and how active they are listening (iTunes radio just plays in the background)

Streaming not so popular, everyone seems to love downloads

I think the reason that people are not buying the streaming membership at this point is because people are used to visiting the Magnatune website and simply ignoring the "commercials" at the end, which are hardly obnoxious. I will be making one change soon to the free site: song number three of each album will soon have 30 second "commercial" about our membership offerings at its end. My goal is to enable people to listen for free so they can decide to purchase an album at a time if they so choose, but to make it slightly less tempting for people to visit and never buy an album.

Another reason I think people are not buying the streaming membership is because it feels odd to pay to listen to music that is on a website. You already can listen on our website, so why pay for something that isn't all that different? At the same time, people have told me they don't want to download music most of the time, they just want it available to them.

What I hope to do to solve this is to make the entire streaming music catalog from Magnatune be imported directly into your favorite music player. This way, you can listen to the local MP3 files that you already own, and the albums and songs from Magnatune streams, as if it were all the same thing and on your hard drive. It's the idea of a "music cloud" -- it's available to you, you don't really sweat the details of exactly where or how.

For example, iTunes treats streaming MP3 files and local MP3 files identically in the catalog. This means that Magnatune could import all its albums into your iTunes library, so you can click to listen to your music inside iTunes, organize it as you wish, it's just that the MP3s are not on your hard drive, they are streamed when you listen. I'm pretty sure this is possible with Winamp, but less sure about Windows media player.

Myself, I'm not that into having to carry a hard disk of MP3s everywhere, but at the same time I don't tend to visit web sites listen to music. I would really like to be able to just use iTunes to listen to the mix of albums I have that are local MP3s, along with music that happens to be on a remote Internet server, not having to figure out what is where, it just works.

Personal Podcast idea

Another idea I have is to have a "personal podcast feed" for each download subscriber, so that instead of having to manually download each album you like, you can simply click a "add this to my podcast feed" button, and the album automatically downloads in the background into your iTunes, Winamp or Windows media player.

Because the album is considered a podcast by your desktop software, your iPod or other MP3 player can automatically add the downloaded album to itself. In this way, the download membership would allow music to flow directly from the Magnatune web site into your iTunes and iPod just as easily as the iTunes music store (actually a little bit easier since you didn't have to choose to pay for it). Also, it means that if you choose to download several albums, you don't have to wait while it happens, it just occurs magically in the background.

Tweaking the home page

After the first 24h since announcing membership, I found that we sold 30% less albums than we typically do after an email newsletter, however the membership signups were so strong that we brought in twice the revenue that we normally do.

I don't think the membership offerings are what has reduced album sales. Instead, I think it's because of the changes I made to the home page, that don't make listening to music as obvious as it used to be.

Here is what the old home page used to look like:

versus the new one:

on the old home page, the central part of the page was dedicated to listing music genres, which I think was a much more compelling immediate action for new visitors to take, rather than reading about what we're selling you, which is what the new page does.

Further proof of the damage done by the new home page is this chart:

which shows daily album sales before and after the new home page.

In a few days, once the effects of the email newsletter have worn off on daily sales, I'm going to try a new home page, that uses the music-genres-in-the-center approach, and mentions that what-we-sell in a much less prominent way. Probably, the what-we-sell will go in the left hand column, where the genres are now in the current design. I'll let you know how it goes!

To conclude

So far, I'm really enthused by how well the memberships have been going. Before we announced them, they had led to a 150% increase in revenue. And after yesterday's announcement, we saw a 200% increase in typical-revenue--the-day-after-an-announcement. If we can keep people interested and renewing their membership, Magnatune will be in a very good place, and we'll be growing significantly again.

-john

Giving money to open source

A year and a half ago, the excellent Linux music player Amarok added extensive support for Magnatune. The programmer, Nikolaj Hald Nielsen, did this on his own initiative, simply because he thought it'd be a neat thing for his favorite music player to have, and because he liked Magnatune's business philosophy.

I really like Amarok, so I volunteered that I'd be happy to donate 10% of gross sales at Magnatune caused by Amarok. I was also so pleased with the quality of Nikolaj's work, that I hired him, and he now spends 50% of his time on Magnatune, and I pay for him to spend the other 50% of his time on Amarok.

I'm *very* pleased to report that Amarok users buy a very healthy amount of Magnatune music. They can listen for free from inside Amarok, so that the streaming albums appear in Amarok as if they were local music, and they can easily buy the music in various open formats.

So far, Amarok has caused $11,557 in sales of Magnatune music!

This morning, I very happily sent a $1155.70 donation to Amarok.

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I also made the same offer to Rhythmbox, another great music player for Linux, and will be sending them a donation shortly as well. Their built-in support for Magnatune is *excellent*, and I've been personally using it myself to listen to our own Magnatune music.

Rhythmbox is installed by default on the ultra-popular, recently-released Ubuntu 8.04.

Mark Shuttleworth, the force behind Ubuntu, recently said this:

I am particularly glad that we are supporting Magnatune, which has articulated a really good future for the music industry," Shuttleworth said. "The problem with the music industry has not been the musicians; it has not been the music; and it has not been downloads. It has been the record companies. So to have a record company that says, 'Well, there is a better way to do this' feels like a good thing for us to support. So, that's groovy."

I've been talking to the programmer behind the magnatune support in Rhythmbox, and he plans to add a bunch of features to it over the summer. Cool!

Lugradio live PDF presentation

I'm giving a presentation in San Francisco today, which can be downloaded here:
Download lugradio_presentation.pdf

Magnatune case study

The Open Rights Group has published a detailed case study of Magnatune and how we operate.

It was written by ORG's Michael Holloway, who did an incredible job of synthesizing information from our web site, interviews with me, and my dozens of comments. This is the best analysis of Magnatune I've ever read, and it goes over just about every aspect of our business model.

The document is currently available as a PDF download as well as available on the ORG wiki.

It is under a Creative Commons by-sa license, and so can be freely distributed.

Magnatune at LugRadio Live USA 2008 in San Francisco on April 12 & 13, 2008

"your average geek conference but with a bit of rock concert flavor"

The very first LugRadio Live USA in 2008 (http://lugradio.org/live/USA2008/start) is taking place at The Metreon in San Francisco on Saturday, April 12 and Sunday, April 13, 2008. Magnatune founder and CEO, John Buckman will give a talk on the main stage on Sunday.

In 2007 LugRadio Live premiered the conference in the UK and it was so successful that the event founders decided to export the community-based conference to “glorious” San Francisco. LugRadio Live has a strong reputation for providing a range of topics about free software, open source, digital rights, technology and more, a compelling list of speakers, exhibitors and birds of a feather sessions, and wrapping it all in a unique, fun, loose, social and inclusive event, which is often described as combining the atmosphere of a rock concert and a computer conference.

John will be speaking on Sunday, April 13 on the Main Stage from 11:00 am to 12:00 p.m. He’ll be discussing Creative Commons, Open-Source-Institute requirements for “open source” and what the future looks like in a post-DRM music world.

The event will present around 30 speakers, over 20 exhibitors, an eclectic range of BOF sessions, and plenty of additional sessions such as our debate discussion panel, a showcase of five minute talks, tech demos, and many opportunities for socializing.  

Guest Blogger: Teresa Malango, Magnatune

A new Buckman project: tubeclan.com

My wife and I have started a new web site:

http://tubeclan.com

It's a "best of youtube" web site, where you can sit and watch one fun thing after another, without having to sift through the junk. My wife and I take suggestions, watch them, and tag them so you can easily watch a single topic of videos (such as classical music, or satire)

I'm very much looking for suggestions of great youtube videos.

Please: email me with youtube urls that you think are amazing.

Not to worry, I'm still very much on Magnatune, this just seemed like a fun side project.

My wife blogged the launch:
http://london.redmood.com/blog/2008/01/introducing-tub.html

she wrote:

YouTube is another of those internet phenomenons that comes along every few years.

John and I are always emailing each other and our friends (and vice versa) with links to great videos on YouTube. Sometimes when I go to YouTube for a particular video, the related videos are just as good. But more often they are not.

The common reaction to YouTube is "what a bunch of crap" and it is. That's what's so fabulous about it. Anyone can post their home-made video, no matter how bad it is. But many of them are great.

So, how do you find the great videos on YouTube? John had the idea to start a blog that embedded our favorite YouTube videos so they would all be together in one place. We brainstormed over some names and came up with:

http://tubeclan.com

John actually came up with that name. All the names I thought of weren't available, wah. We started it about a week ago and have been collecting our favorite videos. We also welcome suggestions for videos and will include the ones we like in TubeClan.

We hope you enjoy watching these videos as much as we do.

Creative Commons Launches CC+

 

This week Creative Commons has announced the launch of the CC+ program which will give users an easy way to sell commercial licensing rights to those who want to use the work for profit.  Magnatune was an early adopter of the CC+ architecture and has been considered a model for how to move between a sharing economy and commercial business.

CC+ represents a major step for the Creative Commons organization, which recently celebrated its 5th birthday. The new protocol provides an infrastructure to leverage commercial value out of otherwise free content. The CC licenses already offer a variety of noncommercial rights, but with CC+, the license can also provide a link to secure commercial rights.

Since its inception, Magnatune has used Creative Commons licensing to help promote its artists and create a fan base by offering easy access for non-commercial podcasting, non-profits, schools, YouTube and remixers, by working with sites like CCMixter.

To read more about CC+ visit the Creative Commons website blog at http://creativecommons.org/weblog/entry/7920

To find out more about Magnatune and how Open Music works: http://www.magntaune.com/info/openmusic

Guest Blogger: Teresa Malango, Magnatune

Free Christmas Compilation Download

Guest blogger Shannon Coulter

For the next two weeks or so we'll be giving away free downloads of our brand new Magnatune Christmas Compilation featuring over 60 minutes of seasonal favorites as played by ten different Magnatune artists. It's a predominantly instrumental compilation, but there are a few select vocal pieces as well including the absolutely angelic sounding Con Brio children's choir and the renowned women's vocal ensemble, Kitka.

Preview the album here.
Get the album download here.