The lessons from Voxpop

The internet has suffered its first record label collapse, with the closure of Vox Pop. Sean McManus interviews outgoing managing director John Paterson to see what bands can learn about marketing online.

The internet has often been said to empower bands, freeing them from record label dependence. At last, musicians can market to their fans directly through websites. CDs can be sold by email order and song samples can be used to convert stray surfers into committed fans.

But for all the hype, sales are very different to website visitors, as Vox Pop (www.voxpop.co.uk) discovered. This website was one of the pioneers in internet music distribution, but it closed in April after an unprofitable year of service.

Started by John Paterson with capital of just £10,000, Vox Pop enabled bands to market their songs independently. Website visitors could listen to tracks online and order customised compilation CDs for £10, picking songs from the whole roster's online catalogue. Bands were paid a royalty each time someone bought one of their songs on a compilation CD. Acts were included in the roster on merit and were not charged for the service.

You can't make a living with MP3 today

The site was popular, but sales were disappointing. "I was surprised at the low levels of conversion," says Paterson, "We were getting a peak of 1400 visitor sessions a week but we would only sell something like 5 CDs." Participation at the site was strong: hundreds entered the monthly trivia competitions and visitors listened to songs online. But Paterson now says the Vox Pop business model is inherently unworkable and a similar site would need to consider charging bands and carrying advertising to break even.

Paterson believes that one of the reasons for Vox Pop's low sales is the internet's giveaway culture, where visitors are happy to listen for free but click on by when faced with a bill. At the moment bands are using websites to promote conventional song purchases, either on CD or as digital song recordings downloaded over the internet. Successful bands of the future, though, might find that giving away their music online generates more money through advertising than song sales would. "You can't make a living with MP3 today," says Paterson, referring to the open standard for free music distribution, "except by selling adverts. But then again internet advertising rates are falling..."

Another limit on sales is consumer apprehension about the security of using credit cards online. A lot of orders went unfulfilled at Vox Pop because customers got cold feet and the credit card details were never sent. "It doesn't matter if you're charging £10 or 10p, people are worried about being charged £500," says Paterson. Bands marketing music online need to recognise that their market is restricted by how much of their audience is happy with online commerce. Vox Pop's own experiments showed that sales were insensitive to price: discounts of between 40% and 50% generated no additional orders. People are either happy to buy at a reasonable price online, or they're not. Bargain price tags will cut revenue per sale but probably not stimulate sales.

The Vox Pop model of distribution incurred most of its costs through the physical manufacture and distribution of CDs. "If you can distribute electronically, you can remove the labour and the cost of goods and shipping," says Paterson. "You could have a model where you sell a song for 10p a track for electronic download. I have a gut feeling that at that point people would do it." At the moment people might be unwilling to disclose credit card details for a 10p sale and the transaction cost of processing a credit card order would probably swallow a large proportion of the revenue.

Far from threatening the real world recording industry, online music is still dependent on it to survive, Paterson concludes. "Everything I didn't like about the music business is true: Hype is 90% of it. People don't like to make their own minds up. They need their friends and the media to tell them it's a cool band before they're interested. Few people will buy a track they've just heard for the first time from an artist they've never heard of before." He believes most of the sales of compilation CDs were from people who already knew one of the bands whose work they were buying. Real world promotion of bands and their websites, through press and gigs, will be vital for successful internet marketing for some time.

Despite losing his investment and "just about paying the bank charges", Paterson is upbeat about his experience with Vox Pop. "I don't regret it," he says. "I learned a lot about the aspirations and problems of real bands and I discovered some great music, which I still have."