How I Built This with Guy Raz - How I Built Resilience: Ethan Diamond of Bandcamp

Episode Date: April 8, 2021

In the early 2000s, the online music community was defined by MySpace, illegally downloaded music, and poorly made band websites. Then came Bandcamp – a music marketplace where fans can directly and easily support their favorite musicians. The company has steadily grown since its launch in 2007, but last year traffic and sales surged. CEO and co-founder Ethan Diamond talks with Guy about launching a virtual concert space in the pandemic and why the company started Bandcamp Friday, a monthly event where all processing fees are waived and all funds go directly to the artists. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca.ca. slash host. Hello everyone and welcome to how I built this resilience edition from NPR. I'm Guy Raz. Each week, on Thursdays, we invite entrepreneurs and other business leaders to come onto the show live to talk about how they've been building resilience into their businesses this year. And you can join us every Thursday at 9 a.m. Pacific 12 East turn on the How I Built This Facebook, Twitter, or LinkedIn pages, or on NPR's YouTube page to hear the live conversation and maybe even ask a question. And today, my conversation with Ethan Diamond, the CEO and co-founder of Band Camp. Bandcamp describes itself as an online record store and music community. Any band or a musician can post their music on the site, sell it,

and also offer merchandise and tickets for live performances. And the artists keep more than 80% of the profit. Bandcamp had been steadily growing since its launch in 2007, but last year was its biggest yet. Traffic to the site surged as concerts and festivals mostly shut down. You know, as you said, we're essentially an online record store and music community where fans connect with artists and directly support them. And about half the business is physical records, so vinyl, cassettes, CDs, a lot of T-shirts as well. And then half the business is digital music, so people buying digital albums and digital tracks directly from the artist. And we also recently launched live streaming, so now tickets are part of it as well. But I would say that the thing

that really sets us apart is that we just built the whole company around the welfare of the artist. So we don't sell advertising. We don't really focus on subscriptions. We just help artists sell their music, and then we take a small revenue share on every sale. So what I like to say is that we only make money if artists make a lot more money. And that sort of alignment of interest that we have built into our business model is really just everything that we're about. I would, you know, we're I would say an artist-first music company. And something like 85% on average of the revenue goes directly to the artist, right? Yeah, it ends up being there's payment processing fees and then there's back-ams fee.

So on hour, and it varies by transaction size, but on average it comes out to about 82% that goes directly to the artist. And then we pay that out every, it usually takes about 24 to 48 hours. Wow. I've heard it described a little bit like Etsy for independent music. Is that a fair comparison? Totally. Yeah. And which I take as a compliment, right?

I think that that's, I think it's a really good comparison. in Etsy and VanCamp are both really large marketplaces that I think really focus on supporting the creators. Yeah, I buy a lot of stuff of Etsy actually this past year. All right. So in the late 90s, one of my favorite books, which is when I reread it now, rethink about it now, it's a little bit dated just because of the content. But it was at the time, I was a younger man, always high fidelity. I love that book by Nick Hornby. I even like the movie, even though it took place in Chicago, not in the UK.

Okay. And so was that you? Like, you launched this in 2007. Were you that guy? Were you like, I'm going to launch an independent record store online? And how did you come up with the idea? Yeah, I don't know if it wasn't quite, the thought initially wasn't really a record store. It evolved into that. So I'll take you through it. So basically what happened is about 13 years ago, there was a band that I loved. And they decided that, you know, they were going to sell their new record. directly to their fans on their own website. And on the day that that record came out, I went to their site and the site just didn't load at all. And I thought, oh, they must, you know, they must be slammed. I'll come back the next time. And the site loaded on that day, but it loaded very, very slowly.

This was also in the days of flash. Everything was flat. So, you know, it took a while to figure out exactly what was going on on the site. But eventually I bought the album. But then I didn't actually get anything. You know, the transaction went through, but no, no music. It was never sent to you or was like a digital, it was going to be a digital download? It was a digital album.

What was the band, by the way? Oh, you know what? I don't want to call them out because kind of the point is that this was a lot of bands at this point. You know, I wrote to, there was an email address on the site and I wrote to the address. And I think it was the lead singer who wrote me back. Wow. And he just sent me a link to a zip file, a totally open zip file that, you know, any could then share. And, and then I opened that up and there are all these, all of these files with

names like Master 3 final. Yes. Yes. Super low quality. No liner notes. Nothing. And, you know, I just basically, in this process, ran into like every technical problem that you could imagine. Yeah. And it killed me for two reasons. You know, one, the music was amazing. And I thought the artist, I thought they deserved all the success in the world. And when you love artists, you want everybody else to hear them. So I knew, like, as a result of all these problems, very few other people would. But, you know, the other thing that killed me about it was that I thought that what they were doing, like, it made perfect sense. You know, of course, an artist should be able to go directly to their fans for support.

The internet makes that super easy. This is the promise of it, I think. And I also think it just creates this mutual, that direct connection, creates this mutually beneficial relationship because not only does the artists get to make more music when I pay them, but also I get to feel like I'm participating in the creation of more of the art that I love.

So I'm more directly connected to that music. But, you know, this was 2007, and there were just no mechanisms like this for musicians. There was MySpace. MySpace, yeah. You know, they didn't have a way through MySpace to sell directly to fans. And it wasn't really your site. It was their logo, a bunch of their advertising.

It was their traffic, their whole identity, right? And then so you had all of these forward-thinking bands, in my opinion, who were spending a lot of time, a lot of money, building out custom sites, and then ending up with something that, you know, didn't really work. And I found that particularly crazy because, again, in 2007, if you were a writer, you had blogger, typepad, movable, all these things that let you set up your own site. very, very quickly and easily. And then it would say like powered by movable type in the bottom.

Yeah, right. But it was yours, right? Yeah. And it just seems so weird that if your artistic output was words, you had all those options. If your artistic output was music, you know, you're out of luck. So, you know, I wanted to solve that problem, not just for, you know, this one artist that I ran into, but for every artist. One of the crazy things about your business is that it's actually been profitable, I think, since 2012. And it's actually quite amazing because if you think about, and we'll talk about Spotify in a moment, but if you think about Spotify, Spotify is valued, I don't know, like $50 billion or something like that. And they have never been profitable, right? It's never, they've never turned a profit. And it's a company that is growing and focuses on growth and has a growth strategy.

What do you guys, is that part of your strategy is growth and scale and, you know, all these terms that you mean, you're in San Francisco, you know, you know these terms. Do all those terms? Do all those terms? matter to you, to your vision for Bandcamp? No. They don't. No, I mean, we're really just focused on our mission of serving artists. That's what inspires me. That's what I, you know, what I get excited about doing. And I would say the company has grown and succeeded more as a side effect of focusing

on that mission that we really have. And that to me is just, you know, that's that's a lot more satisfying than if we, I think, took the approach of, yeah, we were focused on what our mission here is actually grow the company, get it to this size, go public, sell it, whatever it is. That just hasn't really been the focus ever. Yeah. And I mean, basically, from the perspective of an artist, right, you put your music up on band. And these are artists who don't generally want to work with a label, presumably. These are artists who want to retain all the rights, all the master recordings. They want to control their careers.

Those are the people who put their music up on band camp? It's actually both artists who are completely independent and artists who are on labels. So at this point, we have almost 10,000 independent labels on the site. So subpop, merge, ATO, Ninja Tune, Relapse, just loads and loads of independent labels. In fact, I did not even know that there were so many independent labels in the world until I started working on band camp. I've been blown away by that. And, you know, when I think of when a lot of people hear the word label, they think of, you know, Sony, Warner, Universal, right, the big, the major labels. But there's a huge, huge number of these independent labels out

there that, and some of them are really quite large, like beggars group. And, but, you know, a lot of them are just, you know, mom and pop kinds of small businesses. And, and, you know, they, they and their artists are a big, big part of band camp. So I know that like Bjork, her catalog is on band camp and Peter Gabriel, some of his work is on band camp. And it may be difficult for you to answer this question. You may not know, but given the Etsy comparison, is it on average, I mean, do artists make a living off of their work on band camp or is it sort of part of a bigger ecosystem of the things they do?

I would say that any artist should be doing a lot of things. They should be on Bandcamp and they should be in a lot of other places as well. And I think that's the approach that almost all of them take. But yeah, I mean, a lot of artists that are on Band Camp are making significant amount of money. We hear all the time, mostly through Twitter, that the money that artists make through Ban Camp is orders of magnitude bigger than what they're making from streaming services, that it's how they're paying rent and getting equipment and buying groceries and all of all that. So it's clear that we're, to me, a part of how a ton of artists are sustaining themselves.

And that is great. I love hearing that. But the focus for us has never been on measuring how many people are making over this amount. How many people are making over this amount? Because part of what makes Bancamp, Bancamp is that anybody, anybody, can sign up for it. You can sign up for it tomorrow and start five different bands. And, you know, thinking about what that would mean for like the average that each artist makes, it just starts to not make any sense that we would measure it that way. Instead, what we really are measuring is like

the total amount that fans are paying artists through the site. Is that going up? And, and yeah, that's generally been the focus. You know, Ethan, it's so interesting because when you, when you guys came up with this concept in 2007, the conventional wisdom was that no one is going to pay for music in the future. This was just like in the sort of post-Napster era and it was sort of pre-Spotify. But the idea was that no one was going to pay for music in the future, that it was going to be something that you just got. And to some extent, that is true, right? I mean, I mean, the major label artists make most of their money off live touring and very few of them are making a lot of money off Spotify. Obviously, the biggest ones are. How did you know? I mean, How did you know that people would be willing to pay for this music? Or did you know? I mean, were you at any point worried that people just wouldn't pay for it? Yeah, I know that was definitely the hunch at the beginning because that's what I wanted personally. You know, I wanted to have that direct relationship with an artist and directly support them.

And I figured there's got to be other people out there who want to do it this way and who want to directly support ours. But there's just there's no way to do it. It's not easy to do it. And there was a moment early on that I think where everything clicked. And that was when we were looking at the search terms that people were using to get to Ban Camp that ultimately ended in a sale. And we found, again, 2008, 2009. So what we were competing with, right, as you said, was like lime wire, right? Hulk share and stuff I thought.

So we looked at those search terms. And it was the name of an album plus three. word torrent or the name of an artist plus, you know, free MP3 or you know, something like that. And so, you know, I don't know that the people who were using those search terms were necessarily thinking to themselves, I want to get this music for free or, you know, steal this music. But when they got to a place, band camp, where it was clear that they, if they bought here, they were directly supporting an artist, that actually led to a sale. So that moment where we saw those kinds of search terms resulting in money getting to artists was really the moment where it felt like, oh, yeah, this is going to work.

When we come back in just a moment, more of my conversation with Ethan Diamond and why artists and labels have told Ethan, please don't sell the company. Stay with us. I'm Guy Raz, and you're listening to How I Built This Resilience Edition from NPR. The New York Times bestselling book How I Built This is now available. It's a great read and a great book. gift for anyone looking for ideas, inspiration, wisdom, and encouragement to have the courage to put out an idea into the world. It's filled with tons of stories you haven't heard about how some of the greatest entrepreneurs you know and respect started out at the very bottom. Check out How I Built This, The Book, available wherever you buy your books. Hey, welcome back to How I Built This Resilience Edition, and I'm talking with Ethan Diamond. He's the

CEO and co-founder of Bandcamp, an online record store and music community. I know that your growth has been slow and steady and consistent over time. And last year was a huge growth here. We'll talk about in a moment. But it seems to me that what you've built is a company that is sustainable, where you're able to pay people a decent salary. No one's a billionaire out of band camp. But I have to imagine that there have been times over the past 10 years where you have been approached by bigger companies that want to buy you or investors who want to pump more money into the company to grow it. And that can be tempting for an entrepreneur because you know, you've got people who work for you and there's a lot of pressure to grow and build and scale.

And I wonder how you have resisted that kind of pressure to do that. Well, yes. You know, before the pandemic hit, we had regular meetups all the time with artists and labels around the world, really. And the most common thing that I heard from people, you know, direct from artists and labels during those meetings were things like, you know, hey, I just wanted to come over and say, please don't ever sell the company. You're our last hope, you know, things like that. And, you know, I I take that responsibility, the service that we are now providing to artists and labels, I take it, you know, it's a really, it's a responsibility I take very, very seriously. So, you know, we would, I think, really only align ourselves with another company that had the welfare of the artist in mind in this same way. And, and yeah, I, you know, taking money, it can sometimes, it can sometimes change, you know, change your goals, change them to, you know, growth at all costs. And so getting, as you said to, you know, getting to profitability,

that was a really important milestone for us. We wanted to make, we wanted to do that because we wanted to be able to retain control of the company and know that this mission that we have would be around long term. Yeah. You know, a lot of entrepreneurs are looking to build community around their products. And there's a whole, you know, there are sessions and, you know, educational opportunities and founders are looking to figure out how do you build community, community, community? And everyone seems to want to build a media company these days. But it's something that's very difficult to just build, to kind of create out of nothing, right? Especially if it's inauthentic. And I know that you're the sort of the central, one of the central forces of Ban Camp is the community. And it seems to me, that the community has really kind of driven the business decisions that you make, right? Like there are fan accounts and there's a social media interface where you can see what other people are buying and listening to. And the community, I mean, especially when you talk about independent music, like they have strong views on what it means to sell out and to compromise.

So how much does the community, I mean, how much does the community matter in terms of how you guys think of what what you do. Yeah, this gets back to your earlier question about about, you know, the high fidelity and, you know, being that record store. Because when we started off, because MySpace was kind of the reference point where the community had devolved essentially into people spamming each other's pages with their own flyers and saying, thanks for the ad and things like that. We decided that there wasn't going to be no community on Van Camp, zero. You know, There is, there is just, we are essentially a white label service. In those early days, we were a white label service for artists, and that was it.

You know, after a couple years of doing this, and there were, there were enough artists on the site where people started to say, you know, hey, could you tell me, you know, what are the other like math rock bands that are on band camp? And my reaction at first was, you know, why do you, I don't understand why you care, you know, just use Google, type math rock into Google and go and other bands, right? And, but then once, you know, once we've gone from maybe 10,000 bands to 1,000,000, to the 100,000 vans, it started to really make sense to me that there was an opportunity here, that there was a group of people of like-minded fans who want to directly support artists

and directly connect with them in this way and that we have a chance to help facilitate that, right? So we started building the community up, but very carefully and around the idea that the community is, that your ticket to participate in this community is that you're an actual supporter of these artists. So you don't, you know, click a like button or a heart to add something to a collection. You have to, you transact, right, to create a collection. And that gives the collection so much more meaning, right? Because you actually spent a limited resource, right, your money to create this collection. So, you know, that's become just an incredibly important part of the business. It drives something like 30 plus percent of the sales. So meaning, you know,

if you as an artist or adding your music to the site, you know, you can expect that that community to find you and that you benefit from that in a way that would be very different from you just setting up, you know, your own standalone site. So yeah, I feel like the community has gone from something that, you know, I thought, you know, it's just an annoyance to at first, you know, again, based on MySpace to something that is really a key to the entire thing. do you think, Ethan, the music industry will change in a post-pandemic world, if at all? I think there's good news and bad news about that. I'll start with the bad news. I think a lot of venues have closed during the pandemic, and I think a lot more are likely to close because the

Save Our Stages Act, that passed, but the money hasn't been distributed yet. So I worry about what's going to happen to all those venues. And in the meantime, you know, one of the same time, you know, of the crazier monopolies that exists between Live Nation, biggest venue owner, promoter, manager of artists, and Ticketmaster, and, you know, Clear Channel slash IHeart Media that owns radio, right? You know, Live Nation has, their stock has tripled during the pandemic. And, you know, you kind of wonder, like, well, why is that, right? What's going on? They haven't had a concert in a year. And I think that's just because everybody, well, the market anyway is expecting the sort the stranglehold to only get worse, which isn't good for us, you know, music fans, right?

The tickets will get more expensive. I think there will be less diversity in music as a result. But, you know, laws are changing, right? There's a lot of activity, anti-trust activity that I'm, you know, cautiously optimistic about. But, you know, the other part of the industry, I would say that the good news is that I think a lot of people have rethought how to support artists. the pandemic. And there's been a lot of conversation about like, okay, if artists aren't touring or aren't doing shows, what is the way to keep, you know, keep art alive at this time? And how should we be compensating artists? And, you know, that's a conversation that, you know,

I feel like that's why we started band camp, right, because of those issues. So to know that people are thinking about that and that it's changing that there is a lot more direct support happening through platforms like ours is really encouraging to me. I know you've got a brick and mortar record store in Oakland, California, and a live venue space there. And presumably it's been challenging to keep those open. But I wonder, given the consolidation in the industry, especially when it comes to live events, is there a world where band camp in a post-pandemic world enters that space and somehow creates venues for, you know, or partners with people to create more independent venues for live events?

We've thought about it for sure. And I think it would be really interesting to get into. You know, our, I guess, toe dip into this world is our new live streaming service that we really just launched. We've rolled it out now to it's in about 100,000 artists have been enabled with this. And it allows you to stream to anybody. So, you know, you publish a show. It goes out to all of your followers. you can have an integrated merch table.

In some of those early shows, it's very exciting to me because people are buying the merch. There's a chat that's very active. And when somebody bought something, it shows up in the chat, hey, this person actually just bought this vinyl record. And then that kind of triggers more people to do that. And when I think about how many artists are on band camp,

and it seems inevitable that we'll get to this point where all these, there will be shows happening constantly. And you'll be able to have that experience of, you know, a town that's a music town like Austin or New Orleans, right? And you walk down a street and you just hear music everywhere around you and pop your head in and see what's going on and potentially fall in love with the new artist. Right. That's the experience that I think we'll soon have on band camp. Is that feature something you rolled out that you had planned to roll out last year?

Or was that feature a response to what was going on in the pandemic world? 100% a response. Yeah. We weren't thinking about entering that at all. And in retrospect, it was kind of crazy that we weren't. It was conceived, designed, and built in a very, very short period of time. We moved several people off of other projects to get that done. I know that last year was a huge year for you.

But by the way, what kind of growth did you see in 2020 in terms of, yeah, just overall growth? It was enormous. I mean, it was everything more or less doubled in 2020. You know, artists signups, fan signups, sales through the site, digital music, physical music. And I know that last year you started something called Band Camp Fridays where I think you started pretty soon after the shutdown in San Francisco, which was March 17th. I think that Friday you basically had this Band Camp Friday, which was a day where all of the proceeds, except for the processing fees, go to the artist. So you guys waive your commission. and it was huge.

Like you sold like four and a half million dollars worth of music in like 24 hours. Yeah, it was crazy. I mean, and it happened very, very quickly. You know, the pandemic hit, the shutdown happened. We realized, okay, artists are losing a huge part of their, many artists are losing a huge part of their income. What can we, you know, this is our community. What can we do to help?

We've had successful fundraisers in the past. Like when the former president, had the Muslim travel ban. We had a really successful fundraiser for ACLU. The former president had the transgender military ban, and we held a very successful fundraiser for the transgender law center. We've done others, and it just felt like, okay, well, what are we going to do? What's the organization that we should support this time? Should it be something in helping support the venues that are shut down, helping maybe support artist healthcare? And ultimately, what we settled on was something very simple, which is, yes, waiving our revenue share,

and we scrambled to do that. We had our first one on March 20th of last year. And it was huge. It was about 15 times our normal Friday sales, which for the systems team, for support, for developers, it was a really big effort to keep the site running and have to keep up with all of that, but, you know, obviously the benefit to artists was enormous. And since then, we've had, we have another one tomorrow, but we've had 11 since then. And just on those days, fans have paid artists $50 million to the sales. I mean, it is amazing and incredible, and obviously aligns with your mission, but you're also running a company that has to employ. How many employees do you have? About 100 now. So you have to pay 100 people and obviously help sustain their lives. So you

have to be profitable. And I imagine doing that, having those Band Camp Fridays where you guys are getting no money, but you're still processing the fees and you still have to work, right, to make that happen. That can't be easy financially for the company to absorb. You know, we were concerned at the beginning. You know, it was the first one we did. We didn't know how it was going to go at all. And we didn't know that we were going to do another one. And we didn't call it Band Camp Friday.

That's something that just happened, you know, on social media. People started calling at that. And we're like, yeah, that sounds great. let's say embrace that and and use that for all of the future ones as well. But what we saw after that first one is that it resulted in a lot of artists driving awareness to their fans that, hey, here's a way to directly support me. And that extends past that day of the month, right? You know, on Ben Camp Friday, 93% of what a fan spends gets to the artist.

on the other days in the year, right? It's 82% on average. So all days are good days, right, to support an artist. And so the effect of these days has been a big positive, I think, for artists overall. And then because of this alignment of our business model with the interests of the artist, it actually is a huge benefit to Bancamp as well, the company. So we waive our revenue share on those days. But I feel like, and the numbers prove out that it's been a net benefit for

the company overall. What advice would you give to an entrepreneur who wants to run an ethical business, a mission-focused business like yours, but has the opportunity to grow it very quickly and to scale it? If only they would shift their business model or their values ever so slightly, what would you say to them? Well, I guess it just completely depends on what that slight shift looks like. I think, you know, my advice and what has served us really, really well, has been aligning the business model with the community that we're here to serve. And if the shift still allows you to do that, then the only risk really, I think, is that, you know, the priorities of a major investor aren't necessarily going to be your exact same priorities.

You may have to find yourself in a situation where you're pushed to sell the company or push to grow quickly in a way that risks your mission, right? But yeah, I think that at the core, the problem that I've seen in, you know, previous companies that I've worked at is when there's that misalignment in, you know, what you're apparently here to do versus how you actually make money. So that, and that's typically a problem like like an advertising based businesses where, you know, the sales team on the advertising side wants to encroach on the interface as much as possible and get people to see as many ads as possible. And you're, you know, maybe trying to, you know, make a mail program, for example, you know, where you're just trying to. to make the best possible product that people say subscribe to or something like that. So when that misalignment occurs, I feel like that's when anybody gets into trouble. But that's, I think, the majority also of businesses, right? That's an excerpt from my live conversation with Ethan Diamond, the CEO and co-founder of Bandcamp.

If you want to see the full interview or any of our past live interviews, you can find them on the How I Built This Facebook page or at YouTube.com. NPR. And if you want to join our conversation live and maybe even ask questions, they happen every Thursday at 9 Pacific, noon Eastern. If you want to find out more about the How I Built This Resilience series or other virtual NPR events, you can go to nprpresents.org. This episode was produced by Liz Metzker with help from Ferris Safari, J.C. Howard, Bruce Grant, Elmanion, Gianna Cappadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers. Our intern is Janet Ujong Lee. Thanks for listening. Stay safe and I'll see you in a few days.

I'm Guy Raz and you've been listening to How I Built This Resilience Edition from NPR.