New, Web-based production and distribution models give entrepreneurs--creative or not--ways to bypass traditional companies and turn a profit
Last year, New Jersey indie rockers Maybe Pete released their debut CD Between the City and the Stratosphere. However, when it was time to make a full-length album, the group didn't pursue a recording deal with one of the big music labels or even one of the boutique independent companies (see BusinessWeek.com, 6/28/06, "They Signed Gnarls Barkley").
Earlier, the band, which plays in the New York/New Jersey area, burned copies of their three-song demo and gave them away at their shows and offered them to fans on their Web site. "If they wanted to hear us we told them to send us an e-mail with their address and we'd send them a copy," says Kelly McGrath, the band's guitarist. "So when it was time for us to put out our CD, we had already developed a fan base. The free demo had a lot to do with that."
Then they released their debut online. It was offered on their Web site and their MySpace (NWS) site. Payment was set up through a Paypal (EBAY) account. "We did it all ourselves," says McGrath. All told the band spent about $6,000 and sold out their initial run of 1,000 units. In terms of distribution, McGrath says, "it all came down just to postage. We used MySpace and our e-mail list for marketing. We sold 1,000 CDs. That is a success—if we were on a label that would be a failure…you'd have to press maybe 100,000 copies."
More and more entrepreneurs are using the Internet to do business, including everything from marketing to creating professional logos (see BusinessWeek.com, 4/4/06, "Picture Your Business with a Logo").
And technology is presenting new alternatives for small businesses that were once wholly reliant on large companies and their traditional distribution models. Using the Internet has changed not only these established distribution paradigms but the scale and measurement of success. As a result, many are finding it possible that by doing business online, they can completely cut out the offline middle man.
In the print industry as well, technology has presented authors with a real substitute to traditional publishing. Print-on-demand has completely changed the way books are printed and delivered. For the most part, the big houses tend to concentrate on the hit-makers with huge runs, for example 50,000 to 100,000 copies.
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That means unknown authors and generally unprofitable genres such as translations and poetry have a hard time getting published. But technology has made it financially viable to print a small number of units and still make money.
For example, online print-on-demand firm iUniverse.com, based in Lincoln, Neb., has helped change the notion of publishing success. Founded in 1999, the company offers a soup-to-nuts approach to publishing, from submitting a manuscript to managing royalty payments to distribution, via an affiliation with bookselling giant Barnes & Noble (BKS). iUniverse publishes over 5,000 new titles each year.
Not only has print-on-demand made it possible to publish books, it has given authors the opportunity to get noticed. For example, Random House published Laurie Notaro's The Idiot Girl's Action Adventure Club a year after she self-published on iUniverse. It became a New York Times bestseller.
And using the Internet can also create a newer way to conduct a relatively new business. Scott Rosenberg, the founder of online media business Platinum Studios, based in Beverly Hills, is staking a claim that the next wave of comic book publishing and distribution will be online.
Ten years ago, Rosenberg who co-founded indie Malibu Comics, sold his firm to giant Marvel Comics. He acquired comic site DrunkDuck.com as a place to launch and distribute new comics online. "We believe very strongly that while print comics will not go away, the market is turning online," says Rosenberg.
He says that for 60 years the comic book universe, dominated by Marvel and DC Comics, has been a traditional print and newsstand distribution business. According to Rosenberg, under this model, the highest selling comics sold 150,000 to 200,000 units with the next rung about 50,000. To break even, a comic had to sell 25,000 to 30,000 copies.
Rosenberg says by going online he can save money and grab a wider mass audience. For one thing, his time to market is faster. According to Rosenberg, it takes at least nine months to launch a new comic in print while online he can shave three to six months off the lead time by distributing the work over the Internet. "We only have to worry about the speed of the creative process," he says.
Moreover, he says that he can save millions on staff overhead as well. "At Malibu Comics we printed 20 [comics] a month and had over 100 employees. Now we have just eight employees and we are dealing with 1,500 to 2,000 creators." As well, he says that he is able to test new concepts without having to spend $100,000 to launch and market a new comic and see the reaction. Online he can post something and see the reaction immediately.
With distribution models in other industries being revamped at similar speeds, small businesses that can find their online audience stand to benefit on a big scale (see BusinessWeek.com, 9/7/06, "Finding Your Online Audience").