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A Conversation with Derek Sivers (continued)
DS: That's the life, so I was living the dream musician-wise. The last thing I wanted was to stop. So since I didn't expect this thing to make any money, I could just be really utopian about it. And that's where these four things came from, my four missions when starting CD Baby. When I thought of the utopian distribution deal from a musician's point of view, it came down to four crucial points: Number one, I want to be paid every week from the sales of my CD. Number two, I want the full name and address of everybody who buys my CD, because to me, those are my fans. They used the store to get to me, so they're my customers, not the store's customers. Number three, never be kicked out for not selling enough. That was crucial, because traditional distribution gives you like a ninety-day window. "Okay, we'll put you in some shopping malls, but hey, if it doesn't sell well in ninety days, you're out, and we won't ever talk to you again."
PM: Right.
DS: I thought that was so flawed. What if somebody is doing some obscure, weird, electronic tuba music or something? There might only be one person every five years who wants to buy it, but the perfect distribution system would have it there ready for that one person every five years.
PM: That's right.
DS: And then, number four, never allow any paid placement. That means no advertising, nobody buying to get placed higher than anybody else, front page or anything like that, because once you allow paid placement, it's just like the root of all corruption--it's not fair to those who can't afford it.
PM: It un-levels the playing field.
DS: It un-levels the playing field, and it also kills the integrity of the site. If the distributor or the store is featuring some stuff on the front page as the higher search results, and you know the only reason that's up higher is because they paid to be there, it just kills the integrity of the whole system.
PM: Absolutely.
DS: So, especially in the dot.com days, people were trying to throw money at us. I never had any investors. I always turned away all investors. And people wanted to advertise, people wanted to--there's some rich kids with bad records who were just offering to pay us gobs of money to put it on the front page, to stroke their ego.
I still have this real purist attitude that if I were to break any of my utopian visions of this thing, then as far as I'm concerned, the whole project is a failure. It might make me personally richer, but it would make everything I've worked for in the last seven years a failure if I betray any of the missions that I set out to accomplish.
PM: Well, it's not only utopian, I mean, that's kind of an enlightened business model--
[laughter]
PM: --if I may go so far.
DS: Well, when I say utopian, it's something to shoot for. That's the dream-come-true scenario. So, of course, isn't that what we should all be shooting for?
PM: Right, in a perfect world.
DS: Exactly. So yeah, when you start your own little thing, you get to make your own little world that follows its own rules, and yeah, you can make those rules whatever you want them to be. I love that.
PM: I'm good friends with an artist named Arthur Godfrey. I was very surprised to get copy on an email from him this week that came from you. Can we talk about that?
DS: Sure.
PM: He told me that he just sent you his record, and a press kit, and he received a very personal letter back from you, explaining how into his music you were, and that you were going to put him on the front page.
DS: Yeah. Which, by the way, if you talk to him, we need some more CDs, we're backordered.
PM: [laughs]
DS: I actually kind of have mixed feelings about this. I really wanted it to be totally and completely equal. But then we'd get these calls and emails from customers saying, "Well, what do you recommend? What do you like?" I'm like, "Well, okay, I'll tell you, but..." And we were doing so much of this by phone and email that I finally just said, "All right, man, let me do the occasional editor's picks." Basically, everybody does get equal treatment, but occasionally we may personally recommend one.
PM: Sure, one can't help but have personal favorites, if one likes music.
DS: Yeah, exactly. So there's a whole thread on the cdbaby.org message board about this, some people thinking that it's really unfair, and how dare you, and CD Baby believes in equality, so why are you featuring some and not others. I do have kind of mixed feelings about it. But, for example, If I Only Knew Your Name, when that record came in just a couple weeks ago, it was like, "Oh, my God, it's brilliant!" So I mean, we pick one album a day that we think is the best thing that came in all day. And we write up our own little paragraph, our own review of it, and then shoot the musician an email, letting them know.
PM: I was tickled, because Arthur and I have done lots of playing and recording together. And his upcoming record after the one you're featuring was done mostly in the Puremusic Studio.
DS: Oh, cool.
PM: I was just struck that, with the volume of business you're doing, that you still take time to get involved with the record of a single artist and say, "Hey, we heard it, and we thought it was great, and we're sticking it on the front page today."
DS: We listen to everything that comes in. Actually, I did it all myself for the first three years, and now it's somebody's full-time job. Tamara sits there and listens to everything that comes in.
PM: How is it that CD Baby has not gotten into downloads yet, when everyone seems to think that downloads or maybe even subscription is the imminent future of the record business?
DS: In 1998 and '99, MP3.com came out, and eMusic, and Apple iTunes kind of kicked it into gear again but it's been going on since '98. There are some people who are actively chasing the cutting-edge future of music, and then there are some of us who aren't.
[laughter]
DS: I'm just not a "let's throw millions at this idea, hey, it's a long shot, but it just might work, it might define the future" person. I think that's best left to the people with investors that have millions to just toss at an idea that the public isn't asking for yet. I really prefer to kind of chill out and wait until there's a massive overwhelming demand for something. And it also has to do with that fact that it's a niche that needs to be filled. I mean, the only reason I did CD Baby was because there was nobody else doing it. And the only reason I did HostBaby was because there was nobody else doing it when I started, somebody just specifically helping musicians do their web hosting, a web hosting focused on musicians with the tools they need, with the calendar and the streaming audio and all that.
I really only go into something if I feel that nobody else is doing it. And man, with this whole digital music thing and downloads and subscriptions, there are so many companies spending so many millions of dollars trying to be the best, I'd rather just lay back, handle the backend distribution to all these companies that are spending millions and trying do it. Better to ride their waves than try to compete against them.
PM: Right. "You all do that homework, and I'll be there when it gets huge."
DS: Yeah. There were just a few weeks in between when iTunes launched and when they called us and asked us to come into their office to talk about being a distributor to them. But in that few weeks, I was really having to think about this deeply. People were saying, "Well, man, iTunes is getting all the dues and CD Baby has got to do this, man. This is your time. You've got to run with it now. You've got to start offering downloads." And I really had to think this through. God, do I really want to compete with iTunes?
PM: Right.
DS: In a way, it seems to me that it would be a little unfair to the artist to say, "Hey, instead of putting your music on Apple iTunes, come put it on 'MP3Baby.com.'"
PM: Right. [laughs]
DS: I mean, iTunes has the billboards, the TV ads, the massive recognition, the iPod. And yeah, I think I'd be doing a better service for my clients by getting them on to iTunes. I was really about to ring up Apple myself and offer to get all of the CD Baby artists into iTunes. And luckily, they beat me to it. They called us up and said, "We'd like to talk to you about getting the CD Baby catalog into iTunes." I was like, "Hell, yeah! Let's do it!"
PM: And who did you speak with there, and what kind of a person did you run into?
DS: Oh, this is what blew me away. I mean, they just invited us to come up to their office and to talk about this. And for one, I wasn't sure if we were the only ones invited. I didn't hear anyone else talking about it. So I went up to their offices in Cupertino, California, and when I got there I realized they had invited a couple dozen small companies, independent labels and such. Then we went into this tiny conference room, it was about fifty feet. So again, I just assumed that some techie or marketing person is going to come talk to us. And Steve Jobs himself walks out--
PM: Unbelievable.
DS: --in this tiny conference room and says, "We really want the iTunes Music Store to have every piece of music ever recorded available." And the funny thing was, his whole sales pitch was aimed at the reluctant label owners, the ones who weren't sure if they wanted to do this digital thing. But I was already gung-ho on the whole idea.
PM: Right.
DS: Here it is only two years later, now that's laughable. But then, some people were still saying, "The only digital music online is all illegal," or "Hmm, I don't know." So he was pitching it at reluctant label owners, saying, "You may even have titles in your catalog that aren't worth it for you to press up on plastic anymore or put through your distribution channels, because they're only selling a few copies a year." He said, "We want to have those as well. It's frictionless, just get us a digital master. There's no reason for us not to have it in the catalog. We really want every piece of music ever recorded."
So I'm hearing all this and thinking, "Well, man, this is perfect for CD Baby." Because here we have tens of thousands of artists who, collectively, are very valuable. Any one of them might not sell that much, but when you put the whole group together, it's a hell of a catalog.
PM: Right.
DS: So, luckily, they saw the value in that--it was very cool--and they really kind of pursued us and got us into their system. And right after they did, then, of course, immediately Rhapsody called up. And then Napster called up. And then Musicmatch called up. And now there's not a digital music service on earth that would not want to have these 400,000 songs in their catalog. This is what I think is wonderfully heart-warming, because we slowly collected and put all these independent artists under one umbrella, you know what I mean?
PM: Wow.
DS: So, look how much things have changed in the seven years since I started CD Baby. Seven years ago, as a guy with a record, I couldn't get anybody to sell it for me. And now, seven years later, how cool is it that it's more like everybody wants you. [laughs]
PM: Right.
DS: There's a guy putting out his own record, and now everybody wants his music in order to distribute it to the world. continue
