Close Harmony: Bands and Web 2.0

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Advertising isn't the only business model out there. A host of relatively new companies are charging commission for promoting and selling indie music online. Amie Street, an online music retail site for indie music, enables users to sell their music for a $5 storage fee, taken out of the first $5 in sales. It then charges a 30% commission on songs, which sell for less than 98¢ (see BusinessWeek.com, 10/30/06, "Young, Fearless, and Smart"). EMusic, a download site second only to Apple's (AAPL) iTunes, has a similar focus.

Lala.com, another online CD store that takes a cut of CD sales and also a portion of $1 CD trades, promotes artists via online radio station WOXY.com, which has 100,000-plus visitors every month. This year, the lala team went to the SxSw (South by Southwest) festival, held Mar. 9-18 in Austin, Tex., and broadcast up-and-coming acts. It also partners with prominent music studios to host online voting for battle-of-the-bands competitions, says John Kuch, lala's director of business development.

Winning Fans Without Labels

Other sites make money by charging the bands themselves. Music Nation charges bands a $25 entrance fee to compete in online music video contests for record contracts. The site launched its first contest on Jan. 29. More than 1,800 bands already have submitted videos, and hundreds of thousands vote each week, either on the site or through MySpace and YouTube, says CEO and founder Daniel Klaus.

A 33-year-old veteran of Canada's indie music scene, Klaus says that digital has revolutionized how label artist-and-repertoire (A&R) scouts find new talent. "Before, you had to send your demo tape to some A&R director and get them to listen to it," says Klaus. "Now bands can build up a following for their music without having any A&R [representation]."

That's not to say that bands are all getting famous online. Despite all the hype the Internet can bring, there's still a need for bands to grab the gear and perform. No one knows this better than Jon Whitlock. The 24-year-old lead singer of punk band The Barons has never played a gig, yet has an online following of nearly 1,500 and is in the running for a recording contract, thanks to a music video the band created for $90 and uploaded to Music Nation. "Our success is off of these Internet contests," says Whitlock.

To really grab attention, however, Whitlock and his band are gearing up to perform at this year's Edgefest, a stadium concert headlined this year by MTV darlings The Killers. "We got to play really well," Whitlock says.

Holahan is a writer for BusinessWeek.com in New York .