It was interesting to see two similar startups, People's Music and AudioMagnet, announce their funding yesterday. Both seem to allow fans to create their own music storefronts and earn affiliate fees in referring sales. I'm a bit skeptical that this model can be anything more than a niche business:
- Music is a low-margin product. Since there's less margin to give-away or retain, it requires serious volume to make decent money.
- The affiliate programs of Amazon or iTunes, while less flexible than the ones that these startups would offer (eg no ability to write reviews), would probably still offer stiff competition in terms of network effects, music availability, conversion rate, etc.
- While the concept of fan-created & operated storefronts is appealing, I don't think the long tail rule would apply in ecommerce such as this. That is, there will be much greater volume from top stores (like iTunes & Amazon), and then from sites with massive volume than the long tail of fan-created sites & storefronts.
Besides, it's already been tried, although at least these sites aren't a pyramid scheme like BurnLounge was! Still, while I'm skeptical, I hope to be proved wrong and I wish these enterpreneurs well: anything that helps artists sell more music and other stuff is a good thing.
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