Magnatune is one of the pioneer practitioners of Open Music Business Models
Traditional publishing, whether that is in music or books, only gives a small percentage of its revenues to copyright payments and at best serves a very tiny minority of authors and musicians. New internet-enabled distribution methods, which includes e-publishing (such as filesharing for CD's), and `printing-on-demand' models (which includes ordering a CD to order), are being experimented, giving a much larger share of the proceeds to the creative artists. Magnature is often cited as an exemplar of such a model, though a recent controversy shows the tenstion between its partial open-source approach and its for-profit business model, as they more recently introduced Digital Rights Management features.
"Buckman is a former philosophy student-turned-entrepreneur who has a string of startups to his credit. In 2003 he started Magnatune, an independent record label that specializes in online distribution and music licensing. It's a small label that has only 200 artists working in seven major genres. But Magnatune stands in stark contrast to the major record labels, who are best known for exploitative contracts with artists, exorbitant CD prices, CDs messed with digital rights management restrictions, and bullying lawsuits against music's most ardent fans.
It is no accident that Magnatune's corporate slogan is "We are not evil" - a clear swipe at the malevolent moguls of the RIAA-member companies. Magnatune walks the talk. It gives artists a straight 50 percent of all revenues generated by their albums, with no opportunities for gaming the accounting or contract clauses. (The majors give 10 percent or less, and have smoke-and-mirrors accounting.) Magnatune customers decide how much to pay for an album -- $5 to $18, depending on their appreciation for the album and artist. Fans can listen to the music for free over the Internet and pay only when they download it or burn CDs. The music has no DRM locks.
It's too early to know if Magnatune can grow enough to become a serious alternative and competitor to the majors. But its fundamentals - fair compensation for artists, respect for fans, innovative music licenses - seems a solid foundation for market success over the long term. While the company cannot command the mainstream marketing and hype that Sony, BMG, et al can afford, Magnatune is far better positioned to take advantage of efficient and trustworthy socially driven viral marketing on the Internet. And its music is increasingly attractive for licensing in movies, TV ads, workplaces and other uses." (comment from http://onthecommons.org/node/733 )
Including social conscience in pricing mechanisms:
"More and more online music stores are finding ways to combine social networks and Dynamic Pricing while playing on the buyer's conscience at the same time.
Magnatune works on this principle: just listening to music = free; downloading music = paying for it. BUT you may choose to pay a LOW price. Sounds incredulous, so what's the catch?
Magnatune founder and owner, John Buckman, believes that given the option, customers will want to pay for music - and even more than necessary - if artists get a fair deal out of it. You can choose to pay as little as $5 for an album in Magnatune, for instance but you can opt to pay $18 too. Whatever amount you pay, artists will get half.
Customer's conscience / sense of fair play / generosity apparently plays a big part in the purchase process: Magnatune gets an average of $8.93 per album." (http://blog.mediacatalyst.com/pivot/entry.php?id=327)
- Analysis of Magnature's Variable Pricing method: the experience so far.
- This article however, is critical of some of its business practices, at http://business.newsforge.com/article.pl?sid=05/11/16/1458249&from=rss
- See the articles on Open Business, Open Business Models and Open Music Business Models