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'Sometimes the best deal is no deal at all'

After years of negotiations, online CD seller CD Baby signed a digital distribution deal with Snocap. Nobody benefitted.

Words to live by from CD Baby founder and president Derek Sivers.

I've blogged enthusiastically about CD Baby before: I've used the service and recommend it without reservation. Artists who own the distribution rights to their music--which includes just about any unsigned artist--can send as few as 5 CDs (or as many as they like) to CD Baby. For a one-time fee of $35 and 9% of all sales, CD Baby provides an online store front and handles fulfillment. They also have a digital distribution service that places your music in iTunes and other online stores, and takes the same 9% cut.

This is where they had some trouble. Apparently, after several years of negotiations, CD Baby signed a deal with Snocap to distribute music through a MySpace widget. CD Baby handled the digital distribution deals with its artists, Snocap provided the widget. Sounds straightforward enough, but as Sivers explains on his blog post, this took a ton of work, required CD Baby to give up a lot of control while increasing its support costs, and angered a lot of CD Baby artists.

After eight months, the total sales from this deal amounted to $12,000. CD Baby's take was $1,080.

Interestingly, the Snocap debacle was behind CD Baby's quiet and sudden move into direct MP3 sales earlier this year. Sivers was actually conducting an experiment to see if CD Baby could do digital fulfillment without a partner, and what the sales would look like. Answers: yes, and about 10 times better. (The lack of hype surrounding that move cemented my admiration for the company----the button to buy MP3s just showed up on CD Baby artists' sites, without so much as a press release.)

Leaving Snocap's business problems aside, Sivers' post contains some useful business lessons, particularly for independent musicians:

Number one: don't sacrifice control in exchange for promises of greater reach, be it "eyeballs" on the Web or distribution in the bricks-and-mortar world.

Number two: if somebody promises you that a particular online experience (like setting up a site to distribute your music) will be smooth and easy, don't trust them until you've spent some time using the final, working, released-to-the-public version of the service.

Number three: if the other party in a negotiation keeps changing the game plan, walk away. After all, if they don't know what they're trying to do, how can you possibly know whether they'll be able to help you?