INTERVIEW: Derek Sivers
Hit Media/CDbaby.com Founder and CEO
By: Alex Steininger
Hit Media, Inc. and CDbaby.com founder Derek Sivers is a businessman with a good head on his shoulders. He knows what both music consumers and musicians want and need, being both himself. So, in between touring, Derek Sivers decided to start a company that offered his friends a cool place to sell their music online - CDbaby.com
While a single online merchant account, able to process credit cards, would cost a lot for a sole musician to take on (as Sivers discovered himself), he realized he could get a merchant account and sell other's music, too.
The idea, a brilliant concept to help indie musicians everywhere, snowballed - of course. Sivers friends told others and soon his "hobby" company turned into a full-fledged dot com... job. That's right. The musician turned music industry professional, putting down his guitar for a computer, helping musicians like himself get their product out into the hands of consumers.
Since then his company umbrella, Hit Media, Inc., has expanded beyond just an online music site (cdbaby.com), offering musician's web hosting services (hostbaby.com), musician mailing list management (listbaby.com), and college touring opportunities (tourbaby.com). And these are just a few of the areas Hit Media, Inc. covers.
In between his busy schedule of programming and answering business phone calls and e-mails, Derek and I spoke about his company's growth and future.
IMWT: Did you ever imagine CD Baby and its parent company, Hit Media, would grow to what it is now with so much more prospects still ahead for the company?
Derek / CDbaby.com Founder: No way. I'm a musician, man! This was supposed to be my "little side hobby" to help out some fellow musicians, while spending my time in the recording studio or touring. It was that way for the first year until it took over my life.
I can't believe I have 11 employees. It's weird. So much for my hobby!
IMWT: When did you realize you could make a full-time living at it?
Derek: Last time I had a day job was 1992, when I quit Warner Brothers. I've been a full-time musician ever since. I learned how to live dirt-cheap. Learned how to say "yes" to any gig, and make it happen. Learned how to take things I know how to do and make a little money off of them.
IMWT: Obviously, being very busy with Hit Media/CDbaby.com, music has gone to the back burner for a bit. Do you see yourself getting back into music, touring, and giving that a go again anytime?
Derek: I used to daydream drumbeats, basslines, lyrics, melodies, arrangements, etc. That was the stuff that would make me leap out of bed and turn on my recording studio.
These days I daydream MySQL database queries, PHP commands, website-design. I'll be laying in bed thinking of a new thing I could do to help musicians manage their tour schedule or email list. Or a new way to help CD Baby customers have a wish list or assign gift certificates. Then I jump out of bed to make it happen.
It's the same inspiration, really. It's pure creative expression and experimentation.
So these days when I try to sit at my recording studio, I feel pretty empty. I feel like getting back to programming and web-design. So I think I'm just gonna run with it 'til I burn out, freak out, disappear, and join a touring reggae band. Or move to L.A. and be a record producer.
IMWT: You started the company on your own time with your own dime. How do you think this has helped you in the long run, compared to getting some investment capital and running the company off of other's money?
Derek: Oh man, it made ALL the difference. For one: I would never take investors because that's just not the kind of life I want. I don't like to answer to people. CD Baby was set up as a whim, a hobby, a design project. If I had investors up my butt getting all serious about it, I'd just shut it down. (If it's not fun, why do it?)
But the other nice side of that has been that CD Baby isn't focused around profits. Profits are a side effect of doing what needs to be done. Independent music needs a cool place to sell their CDs. A place without ads that's not going to sell them out. A place that communicates with them, and treats them as the stars they are. A place that doesn't discriminate against people that aren't top-sellers. Top priority is to make that "place" happen. To make it cool. For it to exist, even if it wasn't making money.
Focusing on only that, CD Baby has been profitable since the second month in business! Not in debt to anyone. It's a great feeling.
IMWT: From your own hard work, sweat, and blood as a touring musician you've been able to pass along a lot of helpful advice to other musicians and help them in their conquest to make a living off of music. But, through Hit Media/CDbaby.com, do you yourself learn something new about the life of the touring musician and the music business on a daily basis?
Derek: I feel I haven't learned much about it lately. That's why I'm really kinda curious to make and promote my own CD again. Just to "walk my talk" with all this marketing stuff I preach, and see what is still valid, or what's changed.
IMWT: What are your future plans for CD Baby and Hit Media as a whole? Where would you like to see it go.
Derek: Ahhh... no plans. Never had any. Never will. Just having fun. Trying to help musicians get their music out there.
IMWT: Do you plan to expand Hit Media into any other areas of the music business any time soon?
Derek: I think of them more like little design projects, like I described earlier.
Sometimes I'll think, "What if there was a booking agency that would help all musicians submit their packages for showcasing in the college market? Then the agency would represent the ones that got picked to showcase? And it had a killer website that let the musicians update their tour schedules on the web - and let the colleges see who was coming in their area - letting them make bids on the artists..."
Then I'll hop out of bed, write it down, do an hour of planning, decide it's a good idea, call it "Agent Baby" and announce it! Find someone to run it. If it flies, great. If it doesn't, no biggie. But I have fun doing it.
So - yeah I guess I do branch out like that, accidentally.
IMWT: What is the most rewarding thing about running Hit Media/CDbaby.com?
Derek: Paying musicians.
IMWT: What is the most challenging thing about running Hit Media/CDbaby.com?
Derek: Phone calls and emails.
IMWT: Is there ever a day when you want to quit and get into another business because the music business is so frustrating?
Derek: The thing I like about being the owner of the company is I can do whatever I want. If I wanna say, "I'm not going to take any phone calls or even come into the office this month. You guys are on your own," I can. If I want to move to Norway and just concentrate on programming PHP and SQL, I can.
IMWT: The Dot com boom and subsequent fall helped and then hurt a lot of people. Do you feel the dot com boom and the rise in popularity during its hey day helped you at all?
Derek: Not at all! It screwed with everyone's expectations. All those sites that paid you money just for hearing about them. Companies that would go to a conference with a million-dollar booth, busty models, and promise everyone the world. mp3.com paying some musicians $25,000 just because they found loopholes to get lots of clicks to their page.
These kind of things made musicians (or other companies) call CD Baby with the attitude of, "So - I made some music in my basement - what are you going to do for me? What are you going to pay me?"
The fact that I had a much more realistic business model turned some people off during those dot-com days.
IMWT: So have you been feeling any effects of the dot com fallout now that so many companies are going belly up?
Derek: The OPPOSITE! Now that the bubble has burst and people realize you can't get something for nothing. And CD Baby is still thriving after the dot-coms are gone. Now business is better than ever. Musicians, fans, and even other companies are all flocking to CD Baby. It's weird but rewarding.
IMWT: Besides being self-financed, what do you think has helped Hit Media from becoming just another dot com company?
Derek: I never bought into that crap about the "new economy", "eyeballs", "stickiness", "V.C. money", and "ad revenue".
I just run a little store that has to be profitable every month or die.
I only do things if there's a BIG demand for them. I don't add a new feature to the website unless people are begging for it.
IMWT: Where do you think other companies went wrong?
Derek: They did things that people weren't asking for. ("eCollars.com - a vertical portal for all things about collars!")
They got $100 million then felt they had to spend it. So soon "eCollars.com" had 175 employees - and no plan of profitability- for what?
IMWT: And where do you think you could improve your own company?
Derek: Oh I've got my little "TO-DO" list of things people have been begging me to do. That's my list of improvements.
IMWT: What do you see as the future of online music retail?
Derek: I like to NOT chase the future, but just respond to immediate demands.
Let others spend millions guessing what people might want. I'm happier doing stuff people need now.
IMWT: Do you see it as a way to replace brick and mortar shops or do you see it as a way to help the foundation?
Derek: Eh. Not sure. I personally don't really like going to physical stores for music, unless it's something I want immediately. Otherwise I go online (Napster, Bearshare, Morpheus) to hear something to see if I'd like it. Then go online and buy it at the best price and have it sent to me.
But that's just my taste. The world will never go 100% mail-order.
IMWT: Also, do you feel music will soon - in the next ten years - go completely digital and online, or do you think the CD (or some other tangible form of media) will exist?
Derek: Even though you and I travel in circles of people who have gigabytes of mp3s, and live online, there is a HUGE world out there with no computers and no plans to get one.
Many people are just buying their first new car with a built-in CD player!
IMWT: If there is one thing people get out of CD Baby, what do you hope that is as a customer and as a client?
Derek: The feeling of, "Hey - that was easy!"
IMWT: Anything I left out you'd like to cover?
Derek: I've always wanted to do a cover of "Waterfalls" by TLC. Great song...