The thing about useful stuff is: Breaking up is never easy I know

Breaking up is never easy I know - Abba Wednesday, October 10, 2007

You may have read that Snocap and CD:Baby have parted company. In case you are unaware, CD:Baby is effectively one of the world's largest music wholesalers, and even supplies about a third of iTunes catalogue. They have relationships with hundreds of thousands of artists, for whom they provide a wholesale distribution and retail CD shipping service.

I met their CEO a few weeks ago in London, with whom I've remained in touch. When I enquired about the Snocap breakup, he sent me a copy of a text he'd supplied to a music magazine about the news. Clearly, this is one-side of the story, but worth taking note of nonetheless

I learned a hard lesson this year:

Sometimes the best deal for everyone is no deal at all.

In December 2004 Snocap contacted CD Baby about being a part of our digital distribution program. They were a P2P fingerprinting service to help P2P services track and charge for music.

Since CD Baby has over 2.5 million songs directly from the artists, in full WAV format with all metadata, they wanted to import our catalog into their tracking system.

After almost two years in ongoing contract negotiations, in August 2006 Snocap completely changed their business plan to what you see today. Now they still wanted our entire digital distribution catalog, but it was to create Flash widget stores on MySpace, which sounded
like a great idea, so we said OK.

But there was one crucial hitch with this plan: our two options from Snocap were:
(1) - After delivering our entire catalog, step aside for the artists to deal with Snocap directly
(2) - After delivering our entire catalog, administer all activity through our site

The downside to #1 was the obvious "tell your 200,000 clients about us, then make them our clients for free, and get out of the way." The downside to #2 was that artists would have crippled accounts, unable to upload new material, change their pricing, or anything else.

But there's an important lesson learned, in hindsight: At this point we should have walked away, and chosen "neither". We felt screwed either way. But because of two years and thousands of dollars invested into these negotations, we chose option #2. We were assured
that #2 wouldn't be so bad, that any audio we sent them would be activated within hours, that we could send through pricing changes, and many other things.

Unfortunately, everything went about as wrong as could be. Artists had to go through a 21-step process to activate their accounts, which left us with thousands of daily confused emails from artists.

Furious artists trying to upload their songs into Snocap were wrongly told they can't because CD Baby "owns" their rights.

We had to hire 6 new full-time customer service people just to deal with the thousands of problems. We couldn't fix problems ourselves, because all the fixes had to be done by Snocap. So a thousand times a day we had to just helplessly apologize to our clients.

Every company meeting revolved around Snocap. Every employee had to be trained in the endless FAQ about Snocap. For the last 8 months, the CD Baby office has felt like a Snocap office. All we were doing, all day long, was dealing with Snocap issues.

Then the sales reports came in. $12,000 total sales for the 8 months they'd been active. Since we keep a 9% cut, that's $1080 for us, total. Ouch.

As a curiosity, I quietly enabled MP3 sales on cdbaby.com, without telling anyone. A "buy MP3" button showing up next to the "buy CD" button. In 3 weeks, with no announcements, we sold over $110,000 in downloads. Hm.

We decided to do what we should have done in the first place: to choose "no deal" as the best deal for our artists. We told Snocap we needed completely out of the contract, at any cost. Luckily, they agreed. By breaking all ties with Snocap, our artists can go directly to Snocap with no conflicts at all, and we can free-up our 24 full-time customer service people to help our clients with other things besides Snocap issues.

We're happy with it, for obvious reasons. Snocap is happy to have the direct relationships with the artists. The artists are happy to have full control and one less middle-man.

And I share this tale with no hard feelings, for the few who have asked, "What happened?", and the many more that might recognize themselves in a similar situation, and remember that sometimes the best deal for everyone is no deal at all.

Labels: cd:baby, music, snocap