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BizReport : Internet : December 14, 2000


Exclusive Interview with Matt Goyer, founder of Fairtunes.com

The emergence of Napster--and the ensuing lawsuits brought by the major record labels-has highlighted perhaps one of the most vexing issues facing the music industry as it grapples with a digital future: How to get paid.

by Michael Grebb, Special Correspondent

Record labels primarily make money by selling music; artists get a piece of that but traditionally make more from live shows and merchandise. That dichotomy has created a rift between camps, pitting most record companies against Napster while artists have been more split in their opinions. In any event, all of these new digital technologies haven't supplanted the age-old practice of tipping them. But Matt Goyer, CEO of Fairtunes.com, has given the concept a digital twist, allowing fans who may have downloaded music for free on Napster to voluntarily "tip" artists through his Web site. While the site has collected less than $5,000 so far, Goyer says he's just getting started. He took a few minutes to give BizReport his take on digital music and how it might change the way artists are compensated in the future.

MG: Explain the Fairtunes.com philosophy.

Goyer: Fairtunes is a webservice dedicated to providing a voluntary payment system for pretty much anyone. Our current focus is to provide one for artists, musicians, and bands for two reasons. The first reason is that for the majority of artists, even if I wanted to buy their music online, I wouldn't be able to. A voluntary system then enables me to get their music via Napster and then compensate the artist directly. The other very important reason is that record labels screw their artists. When I buy a CD for sixteen dollars, only 50 cents is going to the artist. That is not fair.

MG: How do you think the apparent embrace of Napster by Bertelsmann has changed the landscape? If people eventually pay a subscription fee for Napster, for example, does it diminish the need for tipping artists online?

Goyer: What I think we now need is for another rebel free service to emerge to replace the role that Napster will most likely soon be exiting. Gnutella would have been a logical replacement but it's really struggling with it's current load. I don't foresee that changing. The really only other up and coming one is Freenet, but I have my doubts about it as well. This definitely does not diminish the need for tipping artist online because it's very unlikely that the record labels are going to turn around and suddenly start compensating their artists in a fair manner just because the distribution system has changed. In fact, I think we'll see even more artist abuse under the new system and so a voluntary payment model will be needed then more than ever.

MG: How much of a revenue stream do you think this could become? And how do
you propose to get the money to artists? It would seem quite the logistical challenge.

Goyer: If only we knew. I think that it could be substantial if marketed correctly and we had the artists on board. Right now we're distributing the money to the artists with plain old fashioned checks. The whole process is now automated so it really isn't that much work. However, in the near future we'll be doing direct deposit to artist's bank accounts which will substantially cut down on transaction and mailing costs.

MG: What business model does Fairtunes.com foresee? Are you taking a percentage of tips as a service fee? Or might artists pay a subscription fee to be Fairtunes members? What kind of revenue models are you bouncing around at the moment?

Goyer: In the future, we'll take a percentage of the tips in order to cover our transaction costs. We're also exploring the development of a multi-tiered subscription service with, of course, one tier being free like our current system is. We're also looking into distribution deals and micro-payment systems.

MG: But doesn't that get complicated? What if someone tipped an artist who didn't write the song? Would money then be owed the songwriter? And what about the producer? How do you think an online tipping system can avoid some of these potential problems?

Goyer: I think an online tipping system can avoid these problems by presenting the fan with options so that if they want to tip the song writer or the producer it is easy for them to do so. I don't think the system should dictate where the money goes, that's up to the fan. And of course it'd be great if the fan could see what the artists' recommendations were.

MG: What are the various methods of payments someone can use? And how much easier would this become if "digital wallets" and "cybercash" started to catch on?

Goyer: Currently we support Visa, PayPal, and E-Gold. Within a month we'll be able to accept MasterCard as well. While I don't think digital wallets would make things significantly easier, I do believe it will win over people who are currently shying away from e-commerce.

MG: How do you see Fairtunes.com evolving in the future?

Goyer: In the future, I'd like the website to become a bit more MP3.com-ish. That way every artist would have complete control over their Fairtunes page. We're also working very hard to integrate Fairtunes into the major music listening programs and download clients. We're currently integrated into FreeAmp and have a WinAmp plugin, and hopefully by Christmas you'll see Fairtunes support in a Freenet client and a Napster-clone one as well.

Tags: Fairtunes.com, music, Napster










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