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TECHNOLOGY FEATURE
Independent’s Day
<May, 2001>

garageband.com is as near to a pure musical democracy as one can get.

By Doug Wyllie, Business and Media Correspondent

The Big 5 major record labels each recently announced grand plans to heighten their Internet presence with new services like MusicNet and Duet. The news made a splash with consumers somewhat akin to that of a leaf falling to a frozen pond, as users continue to flock to already-established Internet music destinations like MP3.com, Launch.com, Napster, and Gnutella. Consumers still resent the power that the Big 5 hold over the music they love and want, proving that while it remains true that one is judged by the company one keeps, it’s increasingly true that one is also judged by the enemies you keep. While the record companies try to morph into Internet companies, one Internet start-up has officially become what it’s always said it is: a record label. This week, garageband.com announced “The New Deal,” a program that allows listeners to choose the artists that are awarded record contracts. The site is as near to a pure musical democracy as one can get.

When Little Gets Big
Garageband was in founded in 1999 and is in the business of gathering, nurturing, and promoting new music using the technical assets and cost effectiveness of the Internet. The site has more than 7.5 million users, with more than 780,000 people listening to music in April alone. Recognizing that spending buckets-full of cash on advertising and marketing destroyed one-time category killers like Pets.com, the company has been judiciously watching how much money it spends on marketing. Headquartered in a garage (no kidding) in the Haight Ashbury district of San Francisco, the company melds the democratic nature of the Internet with the company’s proprietary preference engine software, which filters, gauges, and quantifies fan interest level. Garageband offers bands a place to find their audience, and fans a chance to participate in the selection and marketing of new music.

The garageband engine sits behind a website that fundamentally lets bands submit demos to a body of listeners worldwide who then rate the songs. The company’s patent-pending proprietary Lathroum Preference Engine (named for the software’s co-creator, Dr. Amanda Lathroum Welsh) was developed specifically for the garageband rating and review process. The technology is based on a range of measurement comparisons designed to eliminate both the bias and lack of context that frequently skew other competitive rating systems. Every month, hundreds of thousands of users log on to garageband to discover, listen to, and critique new music. Visitors who review 20 records in a given month time period receive a free CD from the company’s online retail partner, CD Baby.

“The initial idea behind the company was to create a record company that used the whole world as an A&R department,” says Tom Zito, chairman, chief executive officer, and co-founder of garageband. Zito was the first rock critic for The Washington Post and later covered the technology and entertainment industries for The Post. “One of the things we learned early on was that there’s a difference between critical acclaim and commercial appeal. We had been struggling with finding bands that people not only say they like but also will cause people to part with their money to listen to that music. We’re really convinced that there’s an opportunity here to create a new kind of record label that is really very much artist- and fan-centric. One that listens to what people have to say about music and tries to deliver to them the kinds of things that they want to hear.”

More than 35,000 bands from 53 nations have uploaded music to the site and about 80 percent of those have already produced a CD. Garageband will begin to now help many of those bands to market their records, provide tour support, and most importantly, supply money to get it all accomplished.

Every month, fans will rate the best artist as they have always done on the site. The band that comes in at number one on garageband’s charts will automatically be awarded an offer for a record deal with the new label. Additionally, the company will offer a record deal to four other acts that have been chosen among the top 20 contenders by the advisory board. The board consists of Brian Eno, George Massenburg, Jerry Harrison, Steve Earle, and Steve Lillywhite. Sir George Martin, who discovered and produced the Beatles, chairs the Board.

When garageband first launched, it was offering $250,000 to one band every two months, but under what the company calls “The New Deal,” each of the five bands chosen every month will receive $10,000. The funds will be divided in halves, with $5,000 in cash up front that can be used any way the band chooses and an additional $5,000 earmarked for marketing the record. Additionally, garageband will help create and pay for a marketing plan. The first five acts will have their records available for sale on the garageband site beginning on June 1, 2000. All the CDs for sale on the site will retail for $10 including shipping, with roughly half of the funds going to the artists and the remainder going to the label.

“The goal of the marketing plan will be to get 1,000 people to come to garageband and buy the CD. If that occurs, the band will receive an additional $22,500–$5,000 in cash, $15,000 for marketing the record, and $2,500 for the band to throw a big party,” Zito explains. “We tell them, ‘now that they’ve sold a thousand records they’re rock stars and they should have a party.’”

If, over a six-month period, an artist is able to sell 3,500 units, garageband will begin to market the record to offline retail stores like Tower and Sam Goody, committing at least $50,000 in marketing, promotion and tour support. Online retail outlets such as Amazon.com and CDNow will also be given the opportunity sell garageband records. A band that sells a total of 33,500 units in one year will receive an additional $250,000 to spend making a record with one of the company’s advisory board members. Imagine for a moment Jerry Harrison or Brian Eno producing a record by a band fewer that 40,000 people have bought.

By, of, and for the People
While July 4th (and the attendant fireworks and barbecue parties) is still more than two months away, it can rightly be said that Independent’s day has already arrived. Employees at garageband jokingly refer to the company as the people’s record company, bringing together all the best things from great indie labels like Dischord and TVT and Internet giants like Yahoo! and Napster.

“Record companies do many things very, very well,” Zito says. “But one of the things that’s happened as record companies have become parts of giant corporations is that there’s become a real disconnect between the fan and the musician. To me, that connection is ultimately what music is all about.”

Bands in The New Deal have showered the company with accolades for taking the steps to become a full-service record label. Danny Espinoza, guitarist for Washington DC-based Yuma House says, “A band like us that isn’t ‘established’ in the industry just needs an opportunity to show what they’re worth. And that’s exactly what garageband is willing to do: share the risk and let you get that foot in the door. With The New Deal, it’s not ‘what have you done and why should I know you?’ but ‘given a chance, what are you capable of doing?’ It’s much better than signing with a major because the music comes first. Bands that send unsolicited material to major labels don’t get listened to—the odds are zero. But garageband created an outlet for unknown bands to be heard, reviewed, and possibly land a deal...all based on the quality of their music, not on whether their friend’s friend’s lawyer knows some A&R exec.”

One thing’s for certain, garageband is a whole new deal.