John Buckman never much cared for the music business. He'd always found it corrupt and unfair to artists. But now it was personal. Jan Hanford, Buckman's wife and a composer of electronic music, had just been dropped by her label because of weak U.S. sales. Buckman and Hanford were upset, though not especially surprised: Any electronic music fan knows that the genre thrives not in the U.S., but in places like Singapore, Mexico, and Israel. If only Hanford could get her music into those markets.
Unfortunately, neither Buckman nor Hanford had spent much time in Singapore, Israel, or Mexico. And even though the London-born Buckman is a seasoned entrepreneur -- he runs Lyris, an e-mail list-management firm based in Berkeley, Calif., that had 2004 revenue of $12 million -- he had never run a truly global company. But Buckman managed to do it anyway, launching Magnatune.com, a global online music label.
On the worldwide consumer marketplace, there is a huge pent-up demand for just about everything.
Buckman's approach -- going global right out of the box -- would probably strike many as overly risky. After all, when most businesses expand, they take smaller steps, first marketing locally, then regionally, and then, perhaps, on a national basis. Only after establishing a domestic presence, the conventional thinking goes, should a company seek to play on the global stage. But that old paradigm is fast becoming irrelevant -- mostly thanks to the Web, which gives sellers an instant global distribution channel and buyers the ability to find products that can't be obtained locally. "On the worldwide consumer marketplace, there is a huge pent-up demand for just about everything," says Andrew Zacharakis, a professor of entrepreneurship at Babson College in Wellesley, Mass.
The challenge is reaching those customers -- especially when you don't speak the language and lack local contacts. In the fall of 2002, Buckman decided to try, investing $1 million of his own money and handing off Lyris' day-to-day operations. He started with the website. Sensing that overseas customers would be put off by a site that seemed too American, he made sure that products were priced in local currencies and order forms had address lines that included space for the country -- something U.S.-based beginners often fail to do. He also made sure that everything interfaced seamlessly with Google's translation service.
Six months later, Magnatune's infrastructure was ready to go. Now Buckman needed artists. He tracked down the e-mail addresses of 200 of his favorite performers and made the pitch. "It was a real chicken-and-egg scenario," he says. After all, Magnatune would succeed only if it had a strong roster, but many artists were wary of signing on with an unknown start-up. Still, about 20 decided to take the plunge, allowing Buckman to post their audio tracks on his site. Buzz grew organically, as fans began touting Magnatune on music blogs and webzines. The site now attracts about 10,000 listeners, about half of them from Europe, who tune in to sample some 185 electronic and classical music artists from around the world. Half of each album's purchase price -- typically about $8 -- goes to the artists. "These are musicians that have no chance of being signed anywhere else because they play in the wrong categories," says Buckman.
That includes artists like Hanford. Once her music was available on Magnatune, she went on to sell more albums in six months than she had over the previous eight years. For Buckman, who expects to recoup his $1 million investment this year, that success is not only a victory over an industry he refers to as a "lumbering beast." It also validates Magnatune's motto: "We are not evil."