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April 28, 2021

Business Model Canvas – Bandcamp

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Bandcamp has a simple business model in an industry that is notorious for ripping the artists off: music. In this Business Model Canvas we look at how the whole model combines to help musicians both sell their music and earn their keep.

Bandcamp #Music #Vinyl

Bandcamp is a platform that started in 2007 and is now known in the music industry as the “anti-Spotify,” giving musicians and artists a channel to sell digital albums, vinyl records, old-school CDs and cassettes, and band merchandise.

According to Bandcamp, which has 76 employees, in the past year fans have used the platform to buy 5 million digital albums, 2 million tracks, 1 million vinyl albums, 600,000 CDs, 300,000 cassettes and 250,000 T-shirts.

LA Times

As we will see below, it is this ethos that helped the company skyrocket during the pandemic into a beloved brand and competitor for the world’s top streaming platforms.

That approach has made it the rarest of tech companies: a beloved business that upends the market while coming across like some combination of consummately curated record store …

LA TIMES

How does Bandcamp make money?

Bandcamp’s business model is a revenue share/commission on items sold depending on whether they are physical (10%) or digital (15%), net of payment processing fees (4-6%).

For digital items, Bandcamp’s fee is 15%. This rate drops to 10% as soon as you reach $5,000 USD in sales (and stays there, provided you’ve made at least $5,000 in the past 12 months). For physical items, Bandcamp’s fee is 10%. Shipping and tax, if applicable, are not included when calculating this fee.

Bandcamp

Bandcamp uses Paypal for transaction processing, and therefore the artists themselves absorb the payment processing fee as is typical for those on the merchant side of the transaction.

Payment processor fees are separate and vary by transaction size, but typically range between 4 and 6%. Please see the details for digital items here, and physical items here, including tips on what you can do to minimize those fees.

BANDCAMP

Business Model Canvas – Payments

The big upshot is that Bandcamp lets the artists set their own prices, rather than being paid out on a calculation like Spotify.

Where Spotify pays royalties according to little-understood formulas that can only be analyzed by reverse calculation, Bandcamp lets artists and labels choose their own prices.

NPR

Business Model Canvas – Spotify

That being said, Spotify is a streaming, digital-only service whereas Bandcamp is characterized as something completely unique.

“I don’t think of this as a streaming service. I consider us a record store and a music community. The primary difference being that we’re a way to directly support the artists that you enjoy listening to. You know, half of the sales on Bandcamp at this point are for physical goods. … Digital has also seen really strong growth.

NPR

Community-Centric or Commercial Partner Strategy?

Bandcamp’s strategy is community-based, as they focus on building a product and brand image that is artist-centric, which carries a lot of value in the age of streaming where many artists feel they don’t get their fair share.

Bandcamp has a lot of momentum and a lot of love, but that has as much to do with the weaknesses of streaming as it has to do with the strength of Bandcamp

LA Times

The community-centric strategy doesn’t exclude partnerships, but they would have to be partners that the company feels are aligned with themselves. That essentially precludes Bandcamp shifting their model to anything that would look and feel even remotely commercial.

We would only consider partnerships with companies that we believe serve artists first and foremost, as we have for the past 11 years.”

LA TIMES

Nonetheless, given the mix of physical and digital goods, there are a lot of moving pieces in the model that could one day be offset with some kind of partnership.

It is a digital-only business: it has no warehouses or delivery service, like Amazon. But Bandcamp allows artists to take orders for physical goods that they can fulfill however they choose – from their homes, from record labels or distributors, or from third-party merch services. Bandcamp simply takes a 10% revenue share of these sales. For bands, it’s a bit like setting up a merch table at a virtual venue.

NPR

In the interim, Bandcamp’s strategy remains community-focused, and the CEO himself is less concerned with business metrics and more concerned with maintaining the vibe that has recently turned the company into a phenomena of sorts.

One example of this strategy in practice is ‘Bandcamp Fridays,’ where the company waves its fees on the 1st Friday of every month for artists. These Bandcamp Fridays brought in more than $40M in sales in 2020 from more than 800,000 fans, demonstrating how strong the community really is.

“If you’ve started to feel guilty about buying music on any day other than Bandcamp Friday, here’s something to keep in mind: on Bandcamp Fridays, an average of 93% of your money reaches the artist/label (after payment processor fees).

Variety

Fundraising and Valuation

Bandcamp raised venture capital in its early days, but has been able to continue to grow profitably and organically since that time.

Aside from a round of venture capital in 2007 and 2008, the company hasn’t taken any money and has been profitable since 2012. It’s grown every year since. 

LA TIMES

It is very difficult to thus determine the valuation of the company, but one data-science group conducted an extensive analysis recently to try and determine an estimate of their revenue in 2020.

Towards Data Science
Towards Data Science
Towards Data Science

Bandcamp Business Model Canvas

A business model is defined as:

“the rationale of how an organization creates, delivers and captures value.”

Alex Osterwalder et al invented the Business Model Canvas to help individuals and organizations conceptualize how to analyze, create, and develop business models.

Explained - components of the canvas
Business Model Canvas - Index

Value Proposition

A digital-only record store and music community. 

Allows artists to set the price of their own goods, including:

>Digital Downloads

>Vinyl Records

>Merchandise

>Bundles

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