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New Business Model for Magnatune
Magnatune relaunched itself today with a new business model. We're now in the no-limits membership business.Why the change? Simply put: membership today accounts for 74% of our revenue. Over the past two years our album download sales have declined while the unlimited downloads memberships have grown.
The two graphs below spell out a clear message from our customers:
- We don't want to buy your downloadable albums one at a time, we want unlimited access. And we're willing to pay.
here is the same data, this time charting each as a percentage of total revenue:
You can see that download revenue has decreased in both relative and absolute terms. In contrast, revenue from memberships has grown 80% in the past year alone. I don't know of any other long-lived Internet music services that are experiencing our kind of revenue growth.
We've also simplified our product offerings:
- Our CD manufacturer has become very unreliable (presumably because of financial problems) and so we've decided to stop selling CDs. They accounted for 4% of our revenue and were also declining. Most people who want CDs simply download the WAV files from us and burn their own.
- Streaming memberships are no longer being sold. The download membership, even though it was twice as expensive as the streaming membership, was chosen by 92% of our customers. People who already have a streaming membership can continue with it, but we won't be offering it to new members.
- We have decided to stop selling single-album downloads completely
- Download memberships are now a simple $15/month, and cheaper still if you choose to prepay more more than 3 months. $15.08 was the average of all the "pay what you want" download members, and the price seemed more than fair, so we choose to simplify and go with a flat $15/month.
Some things that are not changing:
- We're still not evil: we have always paid 50% of membership fees to our musicians, been DRM free, and used Creative Commons licensing. All that stays the same.
- We will continue selling commercial use licenses of our music, though in a few months we will be moving that business to a new music-licensing web site we're building (iLicenseMusic.com).
Posted by John Buckman on March 17, 2010 at 07:51 AM | Permalink
Comments
Glad to see Magnatune is expanding again.
As a download member, my occasional concern is that my downloading tends to be a little clumped together in one month (when I get a chance to find new music). It might make sense to base artist revenue not off of per-month downloads/streams but three month averages (at least for those of us who pay for several months in advance). The disadvantage, of course, is that it takes longer for the musicians to get their money.
Posted by: L at Mar 17, 2010 9:15:40 AM
What happened to the free download of the day? I am still receiving e'mails but can't download for free?
Posted by: sleepybluekitty at Mar 18, 2010 7:39:36 PM
How do I upgrade from streaming (that is being phased out) to download membership?
Posted by: tadeusz at Mar 19, 2010 5:27:05 AM
re: How do I upgrade from streaming (that is being phased out) to download membership?
Two ways, either:
- click on the "download" button on any page at stream.magnatune.com and you'll be presented with the upgrade offer
or
- go directly to http://stream.magnatune.com/member/change
Posted by: John Buckman from Magnatune at Mar 19, 2010 11:58:41 AM
re: What happened to the free download of the day? I am still receiving e'mails but can't download for free?
I had removed the link from the home page for one day, and it's back now. However, it's no longer on every artist page at magnatune, as that seemed like overkill.
-john
Posted by: John Buckman from Magnatune at Mar 19, 2010 12:00:07 PM
I am SO glad to see Magnatune going this way. And that you have not restricted us to PayPal. I am a longtime fan / supporter / member, but dropped out of download membership when you did that. Now jumping back on board with a smile.
Posted by: abuela at Mar 20, 2010 2:41:46 AM
Magnatune is one of the perfect examples of what the digital entertainment industry must do.
I'm glad of your success : simplicity, quality, interesting price ...
Congratulations!
Posted by: PascalNogues at Mar 20, 2010 3:37:18 AM
"Still not evil". Sounds like you plan to become evil later? :)) Keep up the good work, 250$ that I put in to be a lifetime member is turning into a best music investment of my life.
Posted by: Radomir at Mar 20, 2010 3:39:40 AM
Hi,
I just want to add one plea for preservation of the direct album downloads for non-members. I do listen a lot to free streams from Magnatunes and you are my first stop whenever I want to buy some gift or some music for myself. However, I don't think I can afford Rhapsody-like (albeit not evil) subscription. You are very good in what you do, but unfortunately there are still plenty of areas which I am interested in which you don't do and probably won't do for a long time (a first-class full-size symphonic orchestra playing Beethoven's 9th on the level which competes with Deutsche Gramophone). Nothing wrong with that, but until (if ever) you manage to be able to compete with big labels on their turf, I probably cannot designate Magnatunes as my ONLY source of music and I don't think I can afford full membership otherwise.
Best
Matěj
Posted by: Matěj Cepl at Mar 20, 2010 3:42:37 AM
The streaming membership just made no sense to me, and so obviously I got myself a life time download membership. Paying per download also didn't make sense, a monthly download membership being only slightly more expensive is clearly a better option. But maybe that tells you that single downloads are simply priced too high.
"It might make sense to base artist revenue not off of per-month downloads/streams but three month averages"
This is something I also feel would make more sense, downloads tend to be clustered in periods of higher activity - some months may see very little downloading. I would feel more comfortable if I knew artists were payed based on the average of 3 months worth of downloads.
Posted by: Otto de Voogd at Mar 20, 2010 4:44:35 AM
I think that this is a good change for subscription members (due to the new price), but I don't know that it really changes much in the long run. I have held off on the subscription over the past two years because I'd just rather give my $12+ to a particular artist that I've really appreciated. So, while the minimum has increased from $8, it doesn't really affect those who pay higher than minimum anyway.
Not a bad idea though, since the member price is more attractive now than it was before.
Posted by: z at Mar 20, 2010 9:19:52 AM
Is the lifetime membership really for a life time, or is it for two years?
Your web site member info leads me to believe that a lifetime is really only two years.
Please clarify.
Thanks
Dan Hergott
Posted by: Dan Hergott at Mar 20, 2010 10:39:17 AM
Glad to hear Magnatunes is going strong. I recently took out a lifetime membership and agree with Radomir that it is a good investment - especially for newcomers now it is a little cheaper.
I'm not sure why it is listed as $10 per month for 2 years - why not $2 per month for ten years, or $1 per month for 20 years or...? Perhaps it is because people have short time horizons. Hopefully Magnatune will be around for a long long time. I guess the risk is that if most people take out the Lifetime option then the revenue stream will drop unless there is a constant supply of new members. It is not in the interest of Lifetime members for Magnatune to not be profitable and go out of business! I hope if that were to ever happen that we would be given plenty of notice so we could go crazy downloading... as it is now I have been downloading a lot of albums in mp3 format to preview on my mp3 player with the intention of later downloading my favourites in flac or wav format for burning to CD to get the full quality recording.
Posted by: Geoff at Mar 20, 2010 5:54:24 PM
Why the change to fixed-price? I liked being able to choose what an album was worth.
Posted by: Jonathan at Mar 20, 2010 8:07:36 PM
I recently signed up for a 3 month download subscription at the minimum $10/mo with the notion that I would use the non-download URL to also buy any albums I really liked. I hesitated to commit to paying more for the subscription when I mainly use Pandora and Lala.com (both for pay) and I already have a large music collection. (So far, I think I only listened to one magnatune download all the way through.) I guess what would be best for me would be a subscription with download limits, larger streaming limits, and the option of upgrading to unlimited.
Alternatively, a personalized radio that adapted itself to my ratings might get me to switch from Pandora, because it would be nice to know that for anything I like, I can hear the rest of the album on demand. (I really miss Yahoo Music Unlimited.)
Posted by: mattermind at Mar 21, 2010 12:53:16 AM
As long as you offer free formats like Ogg Vorbis and FLAC, everything will be good.
Posted by: Ryo at Mar 22, 2010 2:22:18 AM
re: As long as you offer free formats like Ogg Vorbis and FLAC, everything will be good.
Yes, of course we'll continue to support these open formats.
-john
Posted by: John Buckman from Magnatune at Mar 22, 2010 2:31:58 AM
re: I'm not sure why the Lifetime membership is listed as $10 per month for 2 years - why not $2 per month for ten years, or $1 per month for 20 years or...? Perhaps it is because people have short time horizons.
I received a few emails from people who were confused by this. I had listed the $240 at the equivalent as $10 x 2 years to compare the lifetime price vs the other offerings. However, in the end, this just ended up confusing people, and so now it simply says "$240 one-time"
-john
Posted by: John Buckman from Magnatune at Mar 22, 2010 2:33:51 AM
i fail to figure out how artist share will be calculated in an lifetime membership
Posted by: Djaron at Mar 22, 2010 5:16:18 AM
re: how is the artist share calculated with a lifetime membership?
This is explained in the faq:
http://magnatune.com/info/faq_download#musicians
and the answer is:
"In the case of the lifetime membership, musicians are paid as if you had a five year membership, so that they get paid sooner rather than later."
-john
Posted by: John Buckman from Magnatune at Mar 22, 2010 5:32:27 AM
John, you missed out figure 3:
Just kidding - keep up the good work ;)
Posted by: ninja at Apr 6, 2010 1:09:06 AM
I'm someone who still believes in owning my music and fair compensation of musicians so I deeply appreciate Magnatune. However I am looking to convert my large classical LP collection to CD/MP3 and Magnatune has only a smallish selection of what I'm looking for: maybe 10-15 albums total.
What's to stop me from subscribing for a month, downloading my 15 albums, then leaving, so I can continue to rebuild my collection? That works out to pretty slim compensation to your artists, even if I stretch it out to 2-3 months. Am I missing something?
Posted by: Mark at Apr 26, 2010 8:42:06 AM
@Mark
> Am I missing something?
I think most revenue comes through licensing for commercial purposes not membership. Private use is a way to get the music heard, so maybe you want to include a track in your product: a game, a movie etc.
> What's to stop me from subscribing for a month, downloading my 15 albums, then leaving,
> so I can continue to rebuild my collection?
That's a 'legal v. fair' case. I believe you're allowed to do just that, but will you have a clean conscience? :-)
I've just come to this site, so if I'm wrong, please somebody (Mr Buckman?) correct me.
Posted by: karol at Apr 28, 2010 10:12:59 AM
What's to stop me from subscribing for a month, downloading my 15 albums, then leaving, so I can continue to rebuild my collection? That works out to pretty slim compensation to your artists, even if I stretch it out to 2-3 months. Am I missing something?
The minimum membership period is 3 months, but other than that, nothing prevents you from doing that. Would you prefer that Magnatune use DRM to prevent the 3% of members who do this? (and it is about 3%, as I do track it). I prefer that Magnatune not be evil, and not punish the 97% who "play fair" in order to stop the 3% who don't. And besides, even with that 3% we still made $45 in revenue, which isn't shabby.
As someone else commented on this question:
That's a 'legal v. fair' case. I believe you're allowed to do just that, but will you have a clean conscience?
I totally agree.
-john
Posted by: John from Magnatune at Apr 30, 2010 7:26:15 AM
Hello,
I contacted Magnatune about pay-per-album downloads and was pleasantly surprised at the promptness of the reply. I have been chewing it over since and certainly close to buying into this $15 a month (~£10 UK) deal. However I have similar issues to those raised by others, in that if I download more in one month than I do in another, the share to the artists isn't quite as fair as the "do no evil" idea seems to make out. And I'm not sure you have commented on this particular issue yet in response to it. I too would be happy for my money to be taken as three-month average to put more weight behind that as a proposal (one that seems common to the other commentators too). What happens to my $15 if I do nothing for a month?
Also, all your commercials on the free listening stations imply $15 per month but in reality it's a pay up-front for three months deal. I grant you the equivalent _is_ $15 a month but it's not as per advertised claim. And if I purchase at the end of the month, do I get a full three months from that day or do I just get the remainder and following two months? Then, rolling on into the 4th month is it another $45 / three months up-front payment again or do you just transition into a monthly standing-order type arrangement for the $15?
I have searched for these answers but they don't appear to be clearly explained anywhere.
Another thought is, since you pay artists for the commercial-free streams, am I better listening to the commercial-with streams to decide on a download so as to achieve (in my mind) having the artist paid with 'my' money for actually the taking their music - akin to how I buy real CDs to ensure the artists receive their dues.
Lastly I rip my music from CDs to FLAC and MP3 formats so I can have both the full-definition tracks and also a format compatible all portable players. I would like to download tracks in both FLAC and MP3, but with downloads being taken into consideration for payment to the artists, I guess it means they just get two-halves of the same payment had I chosen just a single format download. I guess this is a non-issue but one that does makes my cogs whirr in my head!
I must say though, from the concept of this business model to the quality of the compositions available, Magnatunes has certainly done a fine job - well done to all that make it what it is.
With best regards,
Glyn
Posted by: Glyn at May 28, 2010 6:16:32 PM
re: However I have similar issues to those raised by others, in that if I download more in one month than I do in another, the share to the artists isn't quite as fair as the "do no evil" idea seems to make out.
I agree, and while currently artist payments are based on monthly payments (half to streaming, half to downloads), this fall I'm switching it so artist payments are based on what you downloaded over your entire payment period. So, if you have a 3 month membership, 50% of your membership fee (ie 50% of $45 = $22.50) would go evenly to the musicians you downloaded. I agree that this seems more fair.
re: And if I purchase at the end of the month, do I get a full three months from that day or do I just get the remainder and following two months?
Good point, I can see how that is confusing. It's a rolling 3 months, based on your own start date.
re: I would like to download tracks in both FLAC and MP3, but with downloads being taken into consideration for payment to the artists, I guess it means they just get two-halves of the same payment had I chosen just a single format download.
You can download the same album as many times as you like, in as many formats as you like. However, for the purpose of artist royalties we only count those all as one download, as that seemed fairest and least susceptible to gaming.
re: I must say though, from the concept of this business model to the quality of the compositions available, Magnatunes has certainly done a fine job - well done to all that make it what it is.
Thanks!!!
-john
Posted by: John from Magnatune at Jul 21, 2010 10:22:37 PM
I'm not sure I can afford on-going membership. Can I sign up for a month, download an album I happen to like, then quit, and then sign up at a later time when I find another album I want to get?
Posted by: george at Feb 7, 2011 12:12:37 PM
I'm not sure I can afford on-going membership. Can I sign up for a month, download an album I happen to like, then quit, and then sign up at a later time when I find another album I want to get?
The minimum membership duration is 3 months. And yes you can sign up for 3 months, cancel at some point, and the sign up again someday in the future.
-john
Posted by: John from Magnatune at Feb 7, 2011 4:17:49 PM
Magnatune is one of the perfect examples of what the digital entertainment industry must do.
I'm glad of your success : simplicity, quality, interesting price ...
Congratulations!
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