The Open Rights Group has an in-depth look at Magnatune, a pioneering record label that licenses its releases under Creative Commons licenses.

This means that Magnatune’s music is:

• Shareable: Users are invited to share their purchased tracks with up to three friends, can listen to the entire catalogue for free via the website’s 128kbps streams, and can download any song as a 128kbps MP3 file.
• Available as “source code”: Ten per cent of the catalogue is also available in its component parts, e.g. scores, lyrics, MIDI files, samples or track-by-track audio files.
• Derivative works: The CC licence used by Magnatune explicitly permits users to make derivative works – such as remixes, cover songs and sampling – for non-commercial purposes, which is further facilitated by the provision of the “source code”.
• Free for non-commercial use: Users can download songs for non-commercial projects, such as a home video soundtrack or compilation album intended for family or friends.

The article has a case study of the company and an interview with Magnatune founder John Buckman, and looks at the economics of free music and how podcasting can be used to promote music.

Free Music Is Established Practice

“The Magnatune approach is that we don’t have the major record label budget, so we let people listen as much as they like. We’re grateful that they’re here at all so let them listen and then convert them into buyers,” explains Buckman.

Although contrary to typical record label publicity, and perhaps counter-intuitively, there is an established tradition in the music industry that, in a strictly limited context, makes tracks available for free. Free tracks are used to convert listeners into buyers. For example, pretty much every label gives promotional copies to tastemakers – DJs and other influential figures – to play the tracks to their communities: in clubs and, most importantly, on the radio and video-television like VH1 and MTV. Tastemakers fuel demand. And, although in the UK radio stations must pay various licence fees, music is free to listeners over the radio.

However, the traditional methods of free promotion are not open to everyone:

“Since radio has become very centralised and extremely expensive and non-economical to break new artists, new means had to be sought out, and the Magnatune means is simply for people to hear the music on the internet.”

So while the major record labels spent the past decade fighting the internet and digital distribution, seeing it as rising tide of illegal file sharing and lost sales, Magnatune embraced the open ecology to develop strategies for turning listeners into buyers. The foundation of this attitude is a warm welcome for every audience member, paid or otherwise, who can listen for free. John believes that artists and their agents should be delighted that someone out there is paying attention because obscurity – rather than copyright infringement – is the biggest hurdle for most working musicians. It is commonly believed in the music industry that once a musician achieves a minimum level of fame (i.e. a “fan-base”) that there are a large number of ways to monetise that fame.

Magnatune uses unconventional means to create the fan base, and then monetises it via the traditional – though updated – methods of selling downloads and commercial licensing rights.

Embracing Podcasting

Magnatune’s aggressively pro-podcaster policies have also spread the message.

For several years, podcasters had a special email contact and were offered a “free credit card” to order any albums they wanted. “Commercial but poor podcasters were similarly offered no-cost use of Magnatune’s music.

As the service grew, it became too expensive to maintain so Magnatune switched to a policy where podcasters can use the 128k mp3s from the website for free, but the perfect quality WAV files required a small fee.

Regardless of format, podcasters are given a royalty-free licence to play and promote Magnatune’s music.

The entire article is an interesting read and is directly applicable to anyone working in Internet media.

via Boingboing