Close Harmony: Bands and Web 2.0

Thanks to their ability to help young musicians win fans and launch careers, music sites are attracting indie artists and record labels

by Catherine Holahan

Josh Epstein began his bid for rock stardom the "old-fashioned way." The 24-year-old jammed with some kids from his suburban Detroit neighborhood, recorded a demo, and shopped it to every record label and club owner whose address he could find. He generated some buzz, but not enough to grab major-record-label attention.

Then he went digital. His band, The Silent Years, uploaded its music to News Corp.'s (NWS) MySpace and entered online contests. Soon they had more than 14,000 MySpace friends and fans talking up their tunes on imeem, a Web site where users share playlists of their favorite music and videos. The band is now closer to a major-label deal than ever before thanks to a music video competition run by Music Nation, a site that awards winners an Epic Records contract. "Without people downloading our music, very few people would have heard it," says Epstein. "The Internet has been huge."

While well-established artists with sales to lose from music piracy often regard online media-sharing companies as a mixed blessing, independent artists have embraced such young startups and their ability to launch bands from obscurity into stardom. (A story often retold by would-be rock stars is that Las Vegas' Panic! At the Disco got signed after sending around a link to its PureVolume site.)

Music and Web Peers

The startups have, in turn, embraced the young artists, developing increasingly better tools and deals to encourage indie bands to post content on their sites. It's not hard to see why these groups have a kinship. Like the indie bands they're promoting, the founders of the raft of online music sites are often young entrepreneurs themselves who are also struggling to get noticed in a world dominated by MySpace and Google's (GOOG) YouTube. The founders of many of the most buzzed-about sites are age 30 and under (see BusinessWeek.com, 3/26/07, "Building a Super Cell Phone").

Take Dalton Caldwell, for example. The 27-year-old chief executive of imeem is one of the young entrepreneurs featured in BusinessWeek.com's up-and-comers under 30 story. His company works with 200 indie labels to promote their content, in addition to providing playlist sharing tools.

The benefit of focusing on indie labels is twofold: First, independent artists want to work with the companies. Second, their content seems to entice groups to congregate, discuss, and network like no other content. In February, Caldwell says, imeem saw 20 million unique visitors. That's a lot of eyeballs to sell to advertisers. "Literally millions of tracks from independent labels are going to be part of our advertising model," says Caldwell.

Some Sites Charge Commission

Last.fm—a music recommendation site and social network run by two other young tech entrepreneurs: Richard Jones, 24, and Felix Miller, 30—is banking on a similar business model. The company detects songs that users have on their computers and then recommends music and other users whom they might like based on the songs in other users' digital collections. Last.fm, which Jones says has 15 million unique users a month, makes money through advertising and by taking a portion of the sales it helps generate from linking to online music and concert ticket sellers. "People come to us to sell new music," says Jones.