Business Week | Kissing Off The Big Music Labels



Kissing Off The Big Music Labels
Team Love has a new approach to selling its CDs: Give away free downloads

It’s late afternoon, and a summer storm is pounding the lower Manhattan streets around the Italian café where Nate Krenkel sits. The shoulder of Krenkel’s faded blue T-shirt is soaked from water dripping off the awning above him, but he’s deep into the tale of how he started a new record label with Conor Oberst, founder of the indie band Bright Eyes. Instead of stopping to move inside, Krenkel tucks the CD he brought along under the breadbasket to protect it and plows on. The decision to start Team Love, he explains, came about a year ago when the pair were in Omaha to celebrate Bright Eyes’ selling 100,000 copies of its latest CD. “We wanted to start something new,” he says. “We wanted it to be an artist-friendly label, but with the addition of some new policies.”

The same weekend in Omaha, Krenkel and Oberst pitched their new approach to Tilly and the Wall, the band they wanted as their pioneer artist. Over plates of Thai food at a local restaurant, they explained that the contract would be short, covering only one album, and that it would give the band plenty of recording freedom. Most unusual, when Team Love CDs went on sale, every song would be available free of charge online. “We thought downloading could be used as a promotional item,” Krenkel says. “There’s something exponential going on. The more music that’s downloaded, the more it sells.” The Tillies agreed. “It’s a way to be part of what’s happening today and not try to control it,” says Jamie Williams.

While the record industry has been waging war against the Net and music pirates for years — arguing that such forces might destroy their business — a fresh crop of artists is taking the opposite approach. Team Love, Tilly, and many others are embracing technology and using it in innovative ways. And this, even more than illegal downloaders, has the potential to recast the industry. That’s because the Net frees musicians from the need for major labels, allowing them to market themselves by giving away their music and to communicate with fans through message boards and blogs. “The Internet changes the dynamic,” Oberst says. “It takes away the marketing advantage that the big labels have and gives people a chance to listen to music they couldn’t hear on the radio or get in a Wal-Mart (WMT ).”

The birth of Tilly and the Wall online hints at the threat to the recording industry. Major labels typically need a band to sell at least 500,000 records to make a decent profit because of their high overhead. Efficient indie bands cut out the middlemen and can make a tidy living on 20,000 or 30,000 albums. Tilly and Team Love expect to break even at 10,000 CDs, a respectable number for an indie band’s first album. With the online marketing, backed up by a tour, Tilly has sold 3,000 copies of Wild Like Children in the two months since the CD’s release.

That conjures up a totally different music world. There will always be the Britneys, Ushers, and Beyoncés who can use the majors’ deep pockets to sell millions of records and get rich. But smaller artists may be transformed into something other than castoffs and money losers. They have the opportunity to earn respectable sums without the burdens of the majors. Rather than destroying popular music, the Internet seems to be opening the door to a flowering of creativity. “The independent world has been energized,” says Michael Hausman, who founded SuperEgo Records with Aimee Mann after the singer left Universal to release an album online in 1999.

If Team Love sounds like a bunch of naive artists, think again. At 24, Oberst is an 11-year veteran of the music industry who developed a cult following when he shot into the spotlight with Bright Eyes. He and his brother helped start the record label Saddle Creek, a nexus of the Omaha indie scene. Krenkel worked for eight years at EMI and Sony, signing bands and songwriters. With their backgrounds, Oberst and Krenkel recognize that setting a precedent of free downloads may ruffle a few feathers in the music world. “We wanted to make a definitive statement that this is our policy, and we’re not particularly interested in what people in the industry think,” Krenkel explains.

Team Love lets the Net do what it does best: build grassroots awareness and create communities of like-minded people. In place of usual tactics, such as paying promoters to push for playtime on national radio and MTV, Team Love is melding its Internet-friendly strategy with sending out CDs to college radio and touring for its first two bands: Tilly and Willy Mason, a 19-year-old acoustic musician from Martha’s Vineyard. It’s also giving people who haven’t seen Tilly on tour a glimpse of the band by posting a free video of Tilly’s single Reckless online. The five-member band uses beguiling harmonies to tell tales of first loves, dancing, and summer nights. And rather than a drummer, Williams keeps the beat by dancing onstage in shiny, silver tap shoes.

Their optimistic, anti-cool approach seems to resonate. Since the album’s debut in June, around 250,000 free singles have been downloaded. At social networking services LiveJournal and Friendster, fans from Los Angeles to Gainesville, Fla., discuss the band, trade updates on upcoming shows, and arrange to meet one another at shows. They sometimes add videos of shows they’ve seen. “There’s something about Tilly that really stands out,” says Chris Aque, a 17-year-old high school senior in Chicago who posts on LiveJournal. He first heard about Tilly from a friend and downloaded their music free online before buying a CD.

Mason put up his own Web site nine months ago, although he admits he’s a bit clueless about publishing online. He initially set up a message board by posting his user name and password online for fans — which could have let visitors alter his site in any way they wanted. A fan in San Francisco came to his aid, offering to run the board. Now people from around the U.S. and Europe post notes online. Mason pops in occasionally to answer questions — such as when his album Where the Humans Eat is coming out (October).

Mason’s upcoming CD is presenting Team Love with the first serious challenge to its Net-friendly policy. As the buzz about his music spread during the summer, Mason drew interest from several labels, including Virgin UK, to issue the album outside the U.S. But the company is balking at Team Love’s free download policy. So instead of final songs, the label plans to put up demos, outtakes, and early versions of Mason’s songs when his CD is released. “First and foremost, we want to be a label that’s good to our artists,” says Oberst.

Team Love is trying to learn from the experience. It’s laying out the potential problems more clearly to other artists it’s trying to sign, including Dave Dondero. Still, Krenkel and Oberst have seen how the Net has helped build Tilly’s popularity, and they’re determined to use the technology to support other musicians they admire. An entire industry is watching.

By Heather Green in New York

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