Disc Makers: In Service
August 23, 2008, Ayala Ben-Yehuda

Independent CD/DVD manufacturer Disc Makers is taking advantage of a do-it-yourself business climate to launch a new division—one that provides the services of a label, but on terms that the company says will allow artists to keep more of what they make from their recordings.

Elite Artist Services offers a complete range of services, from CD manufacturing and packaging, marketing and physical and digital distribution to merchandise production and online fulfillment.

Independent label group MRI will manage Elite's distribution through Sony's RED and provide marketing support at digital and brick-and-mortar retail outlets.

The service is geared toward artists who were previously "either on a major or a nationally distributed indie label, ones that have had a demonstrated level of success in sales, maybe 50,000 units of your last album or 100,000 over your career," Elite Artist Services VP Jeffrey Epstein says. "We also want to work with buzz artists [who] maybe have sold 5,000 or 10,000 [copies] and with a little promotion and a little muscle could sell considerably more."

Disc Makers recently bought longtime partner CD Baby, which allows artists to sell their own music on their Web sites but also supplies digital stores like iTunes and Rhapsody. The launch of the new division coincides with high-profile label departures by the likes of Radiohead and Trent Reznor.

Though an artist could theoretically go directly to RED, that's an option generally reserved for those with bigger clout. Going through Elite means "you don't have to start a negotiation from scratch," Disc Makers president Tony van Veen says. "As a single entity, as artists come into the fold, we will have a portfolio of artists that we can work with Sony RED on."

Elite will facilitate digital downloads through big stores like iTunes and Rhapsody but also through an expanded list of outlets that now includes buy.com, Soundbuzz and Ecast jukeboxes. The relationships with MRI and RED also make possible everything from endcap placements in brick-and-mortar stores to e-blasts and featured singles on download sites.

Artists aren't locked into long-term contracts with Elite. Rather than being paid according to royalty rates, producers' cuts and other label deductions, artists keep what they make after Elite collects its administration and consignment fee on the artist's download revenue (which averages 15%) and its Web fulfillment fee on physical sales (an average of $2 per order) and costs for manufacturing and related services.

The company offers an interactive revenue calculator at its Web site, eliteartistservices.com. Even with the artist shouldering the costs of recording and shifting fewer units, he or she comes out ahead, according to Disc Makers' rough calculation (without factoring in touring or management costs or revenue). Though maximum earnings would vary depending on list price, sales expectations and other variables, Epstein offers an example of an artist going through Elite who expects to sell 75,000 CDs at $14.98: The act can potentially earn up to $7 per CD in stores or up to $11 for each CD sold through the artist's Web site. However, a major-label royalty rate, even assuming CD sales of 200,000, would average $1.41 per CD for the artist.

One could argue that bigger sales offered by a major could still return more in terms of publishing, performance-right royalties from radio play for singer/songwriters and larger touring and merch opportunities as a result.

Still, Epstein says artists in negotiations to release through Elite include some familiar names—"artists that are on majors and also have left the constraints of their label and are looking at the option of going independently."