Digital Media Digest

Let’s face it, the Labels are going to take 70% and that’s fair. What? It’s Not? Of course it is…They spent the thousands in studio and production cost, not to mention manufacturing and distribution, only to have the artist sell more T-shirts and stickers at their merch table because all of their fans are hooked up via BitTorrent. It’s not like they pocket the 70% anyway. There’s overhead, mechanicals, and other royalties that have to be paid, not to mention someone who has to sit down and sift through the data so the auditors don’t pitch a fit.

The question is…Can you be profitable with the other 30% and the answer so far is an overwhelming NO!

You may think you’ve struck gold when you find that company that allows you to setup your own storefront for 10 or 20 bucks, pull in the titles you want to sell and then let’s you make 10 to 15 cents per tracks sold, but the reality is that noone shops at these stores. iTunes and Amazon are satisfying 95% of the digital consumers out there and Rhapsody, Napster, Zune, Passalong, and many other reputable brands are fighting for the loose change already.

After you realize this doesn’t work, you can try building your own store from scratch and licensing in the labels in order to keep more of the profit. The reality of that is that in order to be your own retailer, you have to engage with Visa and Mastercard who are going to take 15 cents per transaction and then another 2 or 3 percent of everything you make leaving you with the same 10 to 15 cents you had in the first scenario. It forces you into developing a marketing strategy around bundling and encouraging larger purchases and that’s where you lose touch with your consumer. They don’t want to spend more than 99 cents and if you make them, they will still find what they want and buy it…just NOT from you.

The economics just aren’t there. They just don’t work. It’s barely worked for iTunes and the dream of selling digital music is driving company after company into the ground. It’s not worth the hassle and if you are looking to be entertained with your money, you’d be better off buying lots of fireworks or just flushing it down the toilet.