Fresh from a $700,000 angel round, indie music sales site FanDistro has started taking bitcoin for downloadable online music sales.
FanDistro, a site that helps bands sell their music while also rewarding their fans with merchandise, previously only took PayPal payments, but is now working with Coinbase as a merchant, said CEO Michael Penfield.
“We’re encouraging people to use bitcoin, and philosophically we love bitcoin. We think it’s something fantastic for the music industry,” said Penfield, who turned on the function a couple of weeks ago.
The biggest benefit for musicians are the low transaction fees, he said. “There are a few things from a musician’s perspective that make the coin attractive, but probably the most important thing is the lack of transaction expenses. We’re working through Coinbase and with the typical size of our transactions there is no fee.”
Penfield is introducing bitcoin support in two phases. The first and current phase will see bitcoins exchanged immediately for fiat currency, meaning that Coinbase takes all of the currency risk. This is a common way for the payment processor to work, and forms the basis of its arrangement with some large customers, such as Overstock.
In the future, though, Penfield hopes to open up the option for musicians to hold a balance in bitcoin, furthering his commitment to the crypto currency.
For now, bitcoin support at FanDistro focuses almost entirely on music sales (although there is also a tool for converting photographs into silkscreen templates, and fans can pay for those in bitcoins, too.
Over time, however, bitcoin could work its way into other areas of the business.
“The next phase for us is to bring brands into the equation, and they can be very local when you’re dealing with a local band,” he said. “We’re in negotiations with several brands to start sponsoring bands. Those transactions are dollar-based at this point, but at some point we’d make those bitcoin-optional too.”
Most if not all of the sites selling independent music to date seem to have been built around the currency first. But these bitcoin-centric sites are looking at it the wrong way, Penfield suggests.
Instead, he is using bitcoin as a “defensive move” to help shore up revenues for bands who may have fans in other countries, where sending money can be prohibitively expensive.
Local bands often have surprising pockets of followings in different parts of the world. For example, his band, Chasing Day, tours the East Coast, but that isn’t where the biggest concentration of listeners comes from. Instead, he has concentrations of fans in Greece, Italy, and – highest of all – England. “I have no explanation for why. I have never been to any of those places,” he said.
Typically, bands can catch on in unpredictable places because of a single taste maker, who may happen to hear its music and tell their friends locally. Whatever the reason, he says, “when an artist has fans in Eastern Europe and they have bitcoin that they want to use, the artist isn’t going to lose that sale.”
Cryptocurrency seems to be a big interest for many musicians, who Penfield suggests an “independent-minded”. Such is the case for Josh Maitland, an engineer in Ontario, who is trying to raise four bitcoins to finish recording an album with his band, Willow Smoke. The self-described “swamp rock” artist is a working producer with his own recording studio.
All five members of Willow Smoke are engineers, who converted a remote cabin to off-grid electricity to record part of their album.
“With bitcoin, there are no fees,” Maitland said. “There is no middleman. That’s the reason that I decided to take this route.”
FanDistro’s $700,000 funding round is unrelated to the bitcoin announcement, insists Penfield. It was the result of two years of effort, and the entire amount came from a single angel investment group. Penfield wouldn’t reveal its name.
He was also tight-lipped on the amount of bitcoin taken in the first couple of weeks, although he said that band sign-ups to the site had increased.
Record image via Shutterstock