Bandcamp stays profitable by pushing physical sales

The Future. Andrew Thompson, founder of research project “Components,” breaks down why Bandcamp (which is in the process of being sold) has a better music business model than Spotify. The key to Bandcamp’s success is vinyl sales, which has re-emerged as the top way for fans to listen to their favorite artists. Coupled with the outsized demand for moviegoers to watch Oppenheimer in IMAX 70mm, premium physical products and experiences may be undergoing a renaissance after a decade of all-you-can-stream digitization.

Record revenue
While Spotify built a one-size-fits-all subscription model that was meant to reach people on a massive scale, Bandcamp focused on creating a tiered system that allows musicians to decide how their music can be consumed.

• On Bandcamp, artists can let fans listen to songs for free, pay a nominal fee for digital downloads, and set robust prices for physical media — all on the same page.
• The artists who do the best on the platform are those who can convert its biggest fans into regular physical-media consumers — especially vinyl, which accounts for 30% of items sold.

Those big fans are the lifeblood of Bandcamp — just 20% of users drive a whopping 80% of the company’s revenue. And although Bandcamp only had $20 million in revenue last year, the company is profitable and actually the biggest seller of independent music worldwide.

Meanwhile, Spotify may have a $26 billion market cap, but it’s been in the red 14 of the past 19 quarters since it went public. The company has had to expand into podcasts, and now audiobooks, to increase its margins.

Spotify will still be the premier destination for users to try out new artists and launch them into the cultural conversation. But for those looking to make some money once they’ve established their fanbase, Bandcamp may provide an enticing model.