| Wednesday, October 15, 2008 | | · | Concert Commemorates 40th Anniversary of MC5’s Seminal Track | | Sunday, October 12, 2008 | | · | Badynee Invited To Make Elevator Pitch On MSNBC | | Saturday, October 11, 2008 | | · | We've Added A New Video | | Friday, October 10, 2008 | | · | Roots/Americana Music Series in Auburn Hills | | Thursday, October 09, 2008 | | · | 13th Annual Big 80's Flashback Halloween Bash | | Sunday, October 05, 2008 | | · | MB Welcomes Bank Heist | | Friday, October 03, 2008 | | · | When Life Gets Tough, Get Your Muruga On | | Wednesday, October 01, 2008 | | · | MB Welcomes MsBehavin | | Tuesday, September 30, 2008 | | · | Ferncare(s) about Music | | Sunday, September 28, 2008 | | · | Pink Floyd Tribute Band seeks replacement drummer |
Older Articles |
|
| Jackie Blue: Continuing Adventures of Detroit’s Funk & Roll Band (Part II) |
|
Anonymous writes
"Jackie Blue" takes you on a step-by-step journey on their quest for world domination via the internet. Includes details on Distribution, Order fulfillment, Tracking of Sales and Maximizing Net Income. A must read for bandheads on the net. Part II in a series.
Jackie Blue
Jackie Blue Part II
Detroit, 26 May 2001
When I last left off, Jackie Blue had just released their first CD “Behind Me” for sale through their website and MP3.com. Jackie Blue supplied the music, lyrics, and art and MP3.com dealt with the order fulfillment. The reason why we chose MP3.com came down to four items:
1) Distribution
2) Order fulfillment
3) Tracking of sales
4) Maximizing our net income
Distribution
I originally compared MP3.com to other online sales organizations such as CDNow, Garageband.com, Amazon.com and the other online distributions companies associated with the Orchard database company. Although I love local music stores and the people that own and work in them, I have not come across one (except Harmony House) that uses a sales tracking system and supplies weekly sales data to bands. By the way, if you know of a local music store that does provide sales tracking, please let me know.
Order Fulfillment
This is a fancy way of saying, the manufacturing of the CD, taking of the order, processing of payment (cash, check, credit card, buffalo chips, etc.), and shipping of the CD. We could do all of these items ourselves with the web, but at the time we did our financial analysis of the above companies, MP3.com offered a package to anyone that was the easiest to use and made us the most money.
The deal was: We upload our music, lyrics, and art files. They produce the CDs using the automotive-based “Just In Time” method (JIT). In the case of MP3.com, JIT literally means that when our fans order a CD at our website or the MP3.com website, MP3.com burns, prints, packages, and ships the CD right then and there.
This got rid of one huge financial hurdle for us: Since MP3.com has no need for finished goods, we didn’t have to front the $2000 to $3000 required to manufacture the first batch of 1000 CDs and ship them to MP3.com. We could either invest the money in touring and advertising or, as in our case, this simply let us make our CD available to our fans since we didn’t have the $2000 to $3000.
Tracking of Sales
With MP3.com and the web, we have a potential worldwide audience and MP3.com uses sophisticated web-based tools to track CD sales. The reason why this is important is because tracking lets you know if people are buying your CD. Also, when we tour and launch advertising campaigns we can measure the effect of touring and advertising on CD sales.
To get the biggest bang for your buck, first you track CD sales for several months without touring or advertising (we’ve been doing this since 16 April 2001). Then you start to play shows (we start at the end of June). Measure if CD sales have increased after a few shows. We’re going to play 2 months of shows and then launch a newspaper based advertising campaign for a month. We’ll measure CD sales again to see if touring, advertising, or a combination of both give us higher CD sales.
If you can’t track CD sales, you have no solid feedback on CD sales. That’s one reason why tracking is important.
The other important reason is if we decide to sign with a major label. One has approached us, but the financial portion of the deal did not make sense for us. That’s primarily because we are not a well-known band…yet. Nothing makes negotiating a good financial package better then solid documentation on three things:
1) CD sales (you need official tracking)
2) The number of people attending your shows
3) Radio play
More on two and three in a future article.
Maximizing Our Net Income
If you’re like us, then music is your life. It all comes down to the question: How do you make enough money so that everyone in the band can eat. MP3.com’s original deal went a long way to helping us eat right away. They split gross sales 50/50 with us. This allowed us to sell our CD for a fair price, in our case $10.99. We received $5.50 for every sale and MP3.com got $5.49. From our portion, we subtracted the following expenses:
1) Recording
2) Mastering
3) Legal
4) CD cover art
5) Website maintenance
6) Advertising
For the first 1000 units sold, we expected to net approximately $4.00 per CD. This is a great net margin!
For MP3.com’s part, they had to subtract at least the following costs:
1) Raw materials (blank CD’s, jewel cases, paper, ink, etc.)
2) Wages
3) Equipment depreciation
4) Website maintenance
5) Legal
6) Advertising
7) Rent
8) Credit card processing
We estimate that they make around $1.00 to $1.50 per CD sold using their Just In Time manufacturing method.
None of the other companies came close to making this margin for us on the sales of the first 1000 CDs. Actually, since we amortized our recording costs over the first 1000 CD sales, using any other online sales channel, where we had to supply complete CDs to the company (Amazon.com, CDNow, etc.), we would loose approximately $1.75 per CD on the first 1000 units. On every sale after the first 1000, we’d make approximately $1.75 on each CD. This means that we actually have to sell 2000 CDs to breakeven.
Our last choice was to sell CDs directly through our website. We’d do the order fulfillment ourselves and we’d use a third party bank to accept credit card and check transactions. With this method, we’d make about $2.00 per CD. A good profit margin except that we’d end up spending more time filling orders then actually writing and playing music. There’s no point in this choice for us.
It All Changed
As you can see, MP3.com’s deal was awesome--too good as it turns out. Two weeks prior to announcing the sale of MP3.com to the French entertainment company Vivendi Universal, MP3.com changed their financial terms. On the same day that they announced their NetCD program (same 50/50 split), they also added a production fee of $3.99 per CD. Unless we wanted to raise our sales price above $10.99, we would now make $3.50 per CD ({$10.99-$3.99}/2). This would cause us to loose $2.50 per CD on the first 1000 units sold. And, on each subsequent sale, we’d make less then $1.00 per CD. The breakeven point moved to nearly 3000 CD sales.
With this change, MP3.com is now clearly in last place in our cost analysis. We are now reviewing our financial analysis and it looks like we will initially press between 500 and 1000 units with either Diskmaker or Oasis, distribute them to online stores via the Orchard database network, and sell them through online stores such as Amazon.com.
I don’t blame MP3.com for raising their prices. Obviously they had to make the tough decision based on a financial analysis, just like we’re doing. I guess defending themselves from all of those MyMP3.com lawsuits is expensive.
In The End
Unfortunately, the change by MP3.com just made the financial hurdle for new bands at least $2000 to $3000 higher (the cost to manufacture a first run of 1000 CDs). For Jackie Blue, after the first 2000 units, everything goes positive again so in the end, we still will be able to feed ourselves.
Feedback, questions, suggestions, controversy and good jokes are always welcome.
Tom
Jackie Blue
www.jackieblue.com
E-mail: jackieblue_2001@yahoo.com
|
|
|
| Jackie Blue: Continuing Adventures of Detroit’s Funk & Roll Band (Part II) | Login/Create an Account | 0 comments | | The comments are owned by the poster. We aren't responsible for their content. |
|
|
No Comments Allowed for Anonymous, please register |
|
| |
| Michigan Business Directory |
|
|
