Van Nuys-based Audiolife (www.audiolife.com), a new startup focused on providing e-commerce tools to musicians, recently raised $1M in angel funding. For today's interview, we spoke with Brandon Hance, the firm's founder, about how his startup is helping musicians to sell both digital and physical merchandise on the web.
What's the idea behind Audiolife?
Brandon Hance: In today's modern music industry, it's become a requisite for success to have a strong, online fan base. From entry level garage bands, to international superstars, they all understand that cultivating your fan base online has a huge impact on your career. Stage two of that, the phase where we are in now, is figuring out how to monetize that relationship, in a direct-to-consumer capacity. That's where Audiolife comes into the picture. We provide artists with e-commerce infrastructure that fulfills digital and physical orders, anywhere on the Internet. That includes digital downloads, ring tones, CDs, and other merchandise. We allow them to have virtual store fronts, portable stores, which they can place on their social networking profiles, on their own dot com, on their blogs, and so forth--anywhere fans already interact with the artist. The store allows in-page transactions, and never redirects them to another site, keeping them captive and leveraging impulse buys. Plus, we provide all of the back end fulfillment--it's soup to nuts--from manufacturing, to fulfillment, to customer service. We started out with a laser focus on the independent musician, where one of the biggest issues is that they don't have capital for upfront inventory. We've got a suite of on-demand, manufacturing tools which means they never have to spend money upfront. They just supply us with art work for the garments they want to sell, and when a fan makes a purchase, we will manufacture that one shirt, custom, for that fan, and ship it out the next day--and the artist just gets paid for it.
What's your background, and how did you get into this?
Brandon Hance: I was actually a student athlete, a quarterback at USC, and was on a couple of the national teams. I was also a music major at the school, and had worked at a number of music management companies, and interned at some labels before that, and got to see where the music industry was headed. When I was done playing football, I had the opportunity to play professionally or do something new, and I choose the latter. But, it for me, it didn't make sense to work up the structure where there were some fundamental changes in the music business. I decided to go out here and do something ourselves that would be really exciting. There's a convergence between the paradigm of the music business, and the business of social media. It represents a tremendous opportunity. So, after graduation, I incorporate the business, and tried to get the best group of people to build the company, and never looked back.
Talk a bit about your recent funding. Where did you get the funding?
Brandon Hance: We raised the money through a bridge financing, in the form of convertible, preferred shares. It wasn't through the Tech Coast Angels, although most of the investors are members of the Tech Coast Angels or CVAN, the Coachella Valley Angel Network.
Is this installed software, or web technology?
Brandon Hance: It's all web-based technology, and software we've build in-house. Artists basically come to our site, we allow them to create a free account, and once they log in they have a number of self publishing tools, which allow them to upload their music and artwork. In a matter of minutes, they can have a whole store of digital downloads, ringtones, CDs, merchandise, T-shirts, the whole bit. There are also lots of tools to customize their store front, to match the look and feel of any destination they might have on the web--whether that's a MySpace page, their own site, etc. They can place these stores directly on the pages, and when fans make a purchase, we fulfill it, and the artist gets paid. There's transparent accounting, and deep analytics to help those artists understand their fan base, and make more intelligent business decisions to move their business forward. To make the model work, there are actually two pieces--one, is we are selling direct to the artist themselves. Most artists are on tour, or playing shows locally, and they need a product to sell at those opportunities. That might be 50 shirts, our a couple hundred CDs. So we have one place where we can ship those all direct to the artist. The other is to the fans themselves. We have some minimum price points for every product they might want to sell. If you pick the exmaple of a T-shirt, all in, for manufacturing, credit card processing, and fulfillment, it cost something like $6.00 for a shirt. The artist has the opportunity to mark that up, and create whatever margin they'd like. If they sell that shirt for $16.00, they make a $10.00 profit every time they sell that shirt. What's important, is they have no upfront cost. Most of the time, and artist would normally have to spend several thousand dollars to make those shirts, and end up sitting on inventory they never sell, or even if they sell wonderfully, they might have 80 small T-shirts no one ever wanted. That's cost prohibitive, and inefficient and cumbersome. We're helping artists with the business of music, so that they can focus on playing, and engaging their fans.
There are lots of custom merchandise sites out there--how do you compete?
Brandon Hance: Two in particular do on-demand, Cafepress and Zazzle. They are great companies, but they have a different focus. They're focused on the hobbyist market, and we're very focused on a subset--musicians. Everything we do, from the product, to pricing, to design tools, are unique and serve musicians, our target demographic, better. The way that items are displayed, our widgets, OpenSocial pages, Facebook Apps, web stores--all of them are branded by the artists themselves. That's a big difference from sites like Zazzle, which forces all of the fans to come through their Zazzle.com branded page. Everything we do is focused on branding the artists themselves. The other things we have, compared to those guys, is none of them have downloads, provide CDs, bulk manufacturing for tour supply, and no warehouse and fulfillment. We do have overlap, but we think of it as concentric circles for the user, and pretty small, and what we do is far more focused and specific to musicians.
How long have you running for, and what's next?
Brandon Hance: We launched our beta in February of 2009, and quickly put together powerful partnerships. One of them is with ReverbNation, which as 600,000 musicians signed up to their service. They're the largest marketing platform in the music business, and we've signed on to be their exclusive ecommerce partner. It's been a long integration, but we successfully launched a month ago. We've now signed up more than 30,000 artists, and are on track to sign up 50,000 by the end of the month. Things are exploding, and the feedback has been tremendous. It's given us an opportunity to showcase to the industry our capabilities, and as a result, there are many other potential partners waiting in line who we're in discussions with right now.
Thanks, and good luck!