Case Studies/Magnatune Study
This case study incorporates text by Michael Holloway at the Open Rights Group and is licensed CC BY-SA.
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Overview
Magnatune, a record label founded in 2003, is a pioneer of open music, the most successful attempt to embed Creative Commons (CC) licences in a sustainable commercial venture, and an early adopter of variable pricing. Initially conceived as part online radio station, part retailer and part licensing-suite, the business model continues to evolve in response to consumer and technology trends. Magnatune makes non-exclusive agreements with its artists and gives them fifty percent of any proceeds from online sales or licensing. All track available on Magnatune come without DRM and buys can set the price they wish to pay for an album. Magnatune represents the most successful attempt to embed Creative Commons (CC) licenses in a sustainable commercial venture.
Magnatune uses unconventional means to create the fan base, and then monetizes it via the traditional — though updated — methods of selling downloads and commercial licensing rights.
Magnatune has been a leader in implementing the CC+ protocol. Lisa DeBenedictis is a popular music on Magnatune. Debenedictis released an a capella version of "Girl and Supergirl" on ccMixter. The a capella vocals were remixed into 76 songs, and Magnatune picked the best remixes at the time for "Mixter One", an compilation album where Magnatune signed distribution agreements with all the chosen remixers. Both the remixers and the original musician (DeBenedictis get paid for sales of the compilation.
One of the remixes from "Mixter One" was then picked up as a commercial license by a bicycle company for a promotional CD, which they in turn sell.
License Usage
The most distinctive of Magnatune’s many unusual features is the policy of ‘open music’, which is defined as having a catalogue that is “shareable, available in ‘source code’ form, allows derivative works and is free of cost for non-commercial use.”
Magnatune advocates for "Shareable music" -- a distinct forking from the standard, ‘all rights reserved’ approach, because users are permitted to — rather than prohibited from — distribute further copies of the track. These permissions are signaled to users by the CC ‘Attribution Non-Commercial Share-Alike’ licence. In this case, permission to share also allows users to listen to the entire catalogue for free via the website’s 128kbps streams, as well as to download the 128kbps MP3 files themselves by clicking the “license” and then “non-commercial (Creative Commons)” button.
The purpose of making music available in source code is to encourage derivative works, such as remixes, cover songs and sampling. Source code also helps users understand the make-up and composition of a work. Magnatune encourages all its musicians to make their tracks available in ‘source code’, a concept imported from software production that means the software program in its original language8. In the context of open music, the source code could be the scores, lyrics, MIDI files, samples or track-by-track audio files that comprise a recording. Again, the CC license used by Magnatune explicitly permits users to make derivative works for non-commercial purposes.
Although non-commercial use of the Magnatune catalogue and its source code are free, users are restrained by the terms of the license from using the work for commercial purposes. Users are not permitted to exploit the catalogue to make a profit. If any track in the catalogue is used with a commercial purpose, for example in a compilation or as a sample in a new track that will be for sale, then the user is required to negotiate commercial terms.
Motivations
As with most record labels, the business model is part business (B2B) and part consumer (B2C) sales, with income divided roughly equally across the two revenue sources. This means that for John and his artists, half their income is from the fans that love the records and the other half is from licenses for commercial use, such as in film, TV or advertising.
