Magnatune provides “Internet music without the guilt.” Based in Berkeley, California, Magnatune is a record label with a 21st Century business model, offering consumers a unique mix of free and paid music. One of the first for-profit companies to adopt Creative Commons’ copyright licenses into its strategy, Magnatune has amassed both an impressive buzz and a large artist roster. We recently spoke with Magnatune founder and CEO John Buckman about the music company’s progress and plans, and how going “some rights reserved” can boost the bottom line.

Creative Commons (“CC”): How do Creative Commons licenses fit into Magnatune‘s business model?

John Buckman, Magnatune CEO (“JB”): The Creative Commons license, which applies to all of Magnatune’s MP3s, enables a few different things.

First, visitors can listen legally to all of our music at no cost, which helps people decide if they want to pay to buy a CD-quality version of the music.

Second, noncommercial projects (like student films) can use our music for free in their projects. This helps our music get wider distribution, and future filmmakers learn that Magnatune is a great place to find music for their films.

Third, commercial projects that are in pre-production can put our music into their project mockups as a “temporary track” to show their client their ideas. When the client accepts, the agency purchases a commercial use license to the music. In this way, Magnatune’s music gets used for Flash-based web sites, promotional videos, and films-not-yet-in-distribution at cost to the agency.

And people like patronizing businesses who are good citizens, who are helping a cause they believe in. Magnatune’s incorporation of Creative Commons helps our visitors feel good about us.

CC: Do you have any specific anecdotes or data about what difference the Creative Commons licenses have made?

JB: We’re having a lot of success licensing our music to indie films, with between 20 and 30 indie film licenses every month. These are real films with budgets from $20,000 to $100,000, but making films is expensive, and they need to keep costs down. The Creative Commons license lets filmmakers put Magnatune music into their film while it’s being made. Then, once the film is accepted for distribution and becomes in effect “commercial” as people then start paying to see it, the filmmaker buys a commercial use license — at a price they could determine online at the very beginning. This “free start-up, permission-not-withheld, fair-price” business that Creative Commons + Magnatune enables is unique today, and I believe is the reason we’ve been so popular with indie filmmakers.

CC: When you explain Magnatune’s use of Creative Commons licenses to potential artists, what is their reaction?

JB: Artists respond in one of three ways:

1) No way, dude. This will just make it easier for people to pirate our music in their commercials.

2) Whatever, you take care of the details.

3) This is just like Linux & open source, I love it.

The vast majority react with #2, probably 60%, with 20% each belonging to camps #1 and #3. For most of them, the business side of music is voodoo, and they trust me to be doing something good for them (after all, with a 50/50 sales split, Magnatune only makes money if the musician makes money).

CC: Where does most of your revenue come from?

JB: Today, it’s split 50/50 between selling downloads to consumers, and licensing music for commercial use.

CC: How do you go about finding the artists who sign with Magnatune?

JB: About 1/3rd of our album releases (on average 10 releases per month) are from artists we’ve recruited. These are either musicians whose CDs we own, or musicians who’ve been referred to us by other Magnatune musicians. The majority (2/3rds) of our releases (about 6 a month) are picked from the 300-400 submissions we get every month. There’s a lot of junk in those submissions, but also some amazing things. For example, we rarely get good classical submissions (our classical is mostly from recruits) but in September, we received (and signed) Altri Stromenti, a Polish Baroque ensemble who had uploaded mp3s to our ftp server.

CC: What would you say is the company’s biggest success so far?

JB: A few of our artists, such as Beth Quist, Cargo Cult, Ehren Starks have sold really well — quantities comparable to an indie CD release — which is super-exciting to me; they’re among my favorite CDs among my entire collection of about 5000 at home.

These days, we’re doing a music license almost every day, and while they’re mostly small, it looks to me like we could become established as the main source for licensing music on the Internet — I don’t see anyone else having a comparable success. Maybe we’ll become the Getty Images of the music world…

CC: What has the company’s growth been like? Do you expect it to continue that way?

JB: We’re 18 months old now, and most of our growth was in the first 9 months, when we received all sorts of national and international press. The past 10 months have seen much slower growth, around 30% for the year. My efforts now are in expanding our reach, through relationships with other companies (i.e., other online stores selling our music) as well as extensive spending in a public relations campaign, so that we can stay in the press.

CC: What’s your dream scenario for Magnatune?

JB: When we all have iPod-like devices and no one buys CDs, Magnatune will need to be a record label known for its absolutely amazing catalog of a half-dozen genres. If Magnatune becomes known for its great music, like Warp Records and Blue Note, that’s the best I can hope for. Because, in the end, it’s all about the music.

CC: Do you think your business model could work for other types of media — say, films?

JB: Yes, I absolutely think the Magnatune “try before you buy” model would work for films and books. I’ve registered “Magnatome.com” as a possible expansion of Magnatune into books. Most visitors see Magnatune in a very simple light: they can listen to our music, the selection is really good, and the product (when you buy) is of high quality. Where-ever there’s a glut of “content”, much of it not-so-good, a Magnatune-like business that picks the best stuff, and let’s potential buyers see the value of their choice, I think there’s a viable business.

However, as one journalist observed that Magnatune is “completely reinventing all aspects of the music business, becoming a fully vertically-integrated company” (ie, doing A&R, recording, distribution, licensing, PR) I think I have my hands full with “just” music.

CC: You’ve recently announced a site called Creativeclearinghouse.com, which also incorporates Creative Commons licenses into a for-profit enterprise. What’s that about?

JB: I’ve noticed that the many artists (musicians, videographers, etc) who use the CC license, use the non-commercial variant, and do so in the hope of seeing commercial use of their work, and hope that the CC license will get them wider distribution and more commercial revenue. However, licensing music is difficult for both parties: the legalese is complicated and expensive in lawyer-time, and it’s hard to set a price. For example, I think many film-makers are leery of using CC license music without first finding out what the price might be if a commercial use license were needed, and how hard that license would be to obtain.

The Creative Clearinghouse is a place where people wanting to license CC music for commercial use could come. The price is set automatically by the same online pricing engine used at Magnatune, and the signed contracts are generated automatically with payment. We’ll also act as the publisher and collect performance royalties on behalf of the artist. What this means is that when a musician puts a CC license on their work, they could add “For commercial use, see http://creativeclearinghouse.com?lic=2134234P” so that a film-maker could easily determine (in advance) that this music is easy to license, they can see what the price will be, and they know that permission-to-use will not be denied.

The Creative Clearinghouse will effectively “close the loop” so that for a CC-license work, both commercial and non-commercial uses are streamlined: online, no lawyers, at a fair price where everyone wins. I’m planning on launching this in the first quarter of 2005.