Google Music’s real innovation: The indie artist hub

Google Music’s coming-out party was widely met with skepticism, with many critics arguing the service merely offers what iTunes (s AAPL) and Amazon (s AMZN) have been doing for years. But the critics are missing one important feature that could eventually change the way musicians make money: Google (s GOOG) Music’s artist hub makes it possible for indie bands to directly sell their songs without any middle men, at a price point of their choosing, while retaining 70 percent of the sales price. This means that Google treats musicians just like Android developers, in turn transforming the music biz into something similar to an app economy.
To see how big of a change this is, it’s worth taking a look at the status quo of the digital music biz. Artists under contract with a major label typically get between $0.08 and $0.14 per $0.99 sold on iTunes, depending on their contract. Indie musicians may make a little more, but still have to share the revenue with their labels, and more often than not, a digital distributor that handles the relations between the label and various download stores.
Self-released indie musicians have had the option to sign up with specialized distributors like Tunecore and CD Baby to receive a higher share. But even these companies have to stay in business somehow, so they’re each taking a cut. CD Baby charges musicians a one-time setup fee of $39 per album and 9 percent of each track sold on top of the 30 percent charged by iTunes. Tunecore charges $50 per album per year.
Those digital distribution models can work out in a band’s favor when compared to the traditional share paid by a label, but it’s still quite a bit of money, especially for musicians who want to leverage a huge back catalog. Google Music, on the other hand, only charges musicians a one-time fee of $25, with no additional charges, after which they receive the full 70 percent share.
I know what you’re going to say: Labels may take a big cut from an artist’s digital download revenue, but they’re also doing a lot to promote a band and help them build an audience. That’s true, and Google Music won’t be able to match this benefit, despite Google putting a big emphasis on curation and discovery during the service’s launch event on Wednesday.
However, the secret weapon for indie artists is Google’s other big music service: YouTube. The video site currently serves more than three billion videos every day, and stats from TubeMogul showed last year that around a third of the views of YouTube’s top 2500 partners were music videos. Indie artists will soon be able to utilize this huge audience to sell their music directly on YouTube, Google revealed yesterday.
In other words: Media-savvy indie musicians now have the option to sell their music directly to fans, without any middle men, and promote it on one of the world’s biggest sites for free music entertainment. That means some musicians may spend a lot more resources on producing interesting and catchy viral videos, and in turn gain some independence from traditional distribution methods.