We were particularly interested in how Magnatune makes money from Creative Commons (CC) licensed music. Does Magnatune make money? Is it profitable? Where does the money come from? Where does it go?
According to John, Magnatune does make money; enough to pay the salaries of its four employees and occasionally re-invest in the business. Revenue is evenly split between Business to Consumer (BtoC) and Business to Business (BtoB) revenue streams. The BtoC revenue comes from some of the usual retailing sources: sales of CDs, downloads, etc. However, what we found most interesting were the ways in which the conversion of CC licensing to commercial licensing was generating BtoB revenue for both Magnatune and artists.
One compelling example is the use of CC licensed songs in indy films. The initial expense for the film-maker to incorporate the music is nothing. However, the moment the film is acquired for commercial release or screened for a fee, the artist and Magnatune can look forward to revenue from the film-maker. It's a winning situation for all involved.
Podcasters are another source of BtoB revenue. Podcasters need music too - and often they look to CC archives/collections like ccMixter and Magnatune to find it. Typically, as long as their use is non-commercial, there's no fee for the reuse of the music. However, if the podcast is sold commercially, again, Magnatune and the artist stand to realize some return from their work.
All in all we found Magnatune's to be one of the most inspiring example of how Creative Commons can provide an efficient tool for sharing content, while also opening up revenue opportunities.