How Audiotree Discovered the Key to Making Money in Today's Insane New Music Economy

Audiotree wanted to be the goldilocks of record labels: not too big, not too small. Then they realized there was a better way.

By Noah Berlatsky Mar 27, 2017
via Audiotree / YouTube
via Audiotree / YouTube

Record labels? Who needs them? In a world where an increasing number of bands can record, distribute, and market their own music online without having to go through middlemen, why would anyone bother with a label?

Audiotree, a music service for artists based in Chicago, was created in 2011 as a response to that question. Co-founders Michael Johnston (now president) and Adam Thurston (who runs operations) wanted to provide an à la carte label that would give artists just what they needed and no more. If you wanted the full menu, Audiotree could do that; if you just wanted management and booking, you could have that too. If you just wanted a team to help you make awesome videos, Audiotree would just make you an awesome video.

Over time, though, it turned out Audiotree was really, really good at making videos. The crew would shoot live performances of musicians living in or passing through Chicago on tour and produce high-quality half-hour recordings of the sets. They've shot videos with indie darlings Ian Sweet and Homeshake; they regularly record shows from Chicago's iconic Lincoln Hall and smaller venues. And they're not afraid to get a little weird with things, and make videos that are a little more off-the-wall; last year, Audiotree launched a video series of musicians performing in bodegas, laundromats, and other unlikely makeshift venues around Chicago. They called it "Far Out."

When the team at Audiotree realized recording and making money off of live sessions could a viable business model (for themselves and for their clients), the other services slipped away.

These days the guys at Audiotree have their hands full. They've grown from three employees to 20, and they record more than 150 performances a year. Rather than replacing record labels, Audiotree offers one very specific service that can be used to support performers, whether they're signed to traditional labels or not.

I talked to Johnston by phone about how Audiotree's business model helps up-and-coming musicians, how they've gotten better and better at shooting videos, and what the future of the company could look like.

TrackRecord: What does Audiotree do?
Michael Johnston:
If you look at Audiotree, we have a couple different divisions—or branches of the tree, if you want to be real corny. We have Audiotree live sessions. We film about 150 of those per year, and then we split 50 percent of the money we make from the sessions with the band if they're independent, or with the label if they have a label. Whoever is the copyright owner of that music, we pay [them] 50 percent of the profit we make from selling those sessions. We've filmed almost 800 sessions in the six years since we launched.

I would say local Chicago bands make up 20 percent of the sessions and everybody else is from all over the country. Usually the bands come in to record with us when they are on tour. So they come from Detroit or Minnesota or Wisconsin. They drive in, they show up at noon, we load them up, soundcheck them, and go live at 2 p.m. From load in to load out, it's about three hours, because then they have to go to their gig in Chicago that night.

We produce a half-hour show, and we archive that footage about two weeks after the show happens. We put the video on Youtube, and then it's also available on Spotify. It's on iTunes, it's on Amazon, it's on Pandora. People buy the videos and we [also] get ad revenue from YouTube, so there's a few different ways we make money off of those live sessions. We also have placed the songs in movies and in TV shows over the years; people will write us wanting to use our version of a song.

The other side of it is that we do production for other brands and companies. So after a few years of filming, we started getting phone calls from Live Nation and radio stations, even from McDonald's. We're doing a project right now for the Marriott. There's a whole other wing of Audiotree productions that we don't put our name on, but we are doing work for others.

We've filmed Depeche Mode in arenas. We'll film something for Lionel Ritchie one day and an independent band the next.

TR: How is your model different from a traditional recording label?
MJ:
Well, traditionally, either a band pays for their own record and then they go and try to promote it or sell it. Or else a label will promote it and sell it and they'll essentially give you an advance, which is a loan. And then they work back that loan.

Whereas we don't charge bands. We make money on the recordings themselves. So essentially, we're investing in 150 bands every year. A typical record label would take 10 bands or five bands, or whoever is on their roster, and invest a larger amount of money in that band. We look for people and partners who are smaller and need help, and we invest in them and form a partnership. I think that's a little different from what a traditional model has been.

I've made friends with a lot of different people who do sessions around the country, and one of the questions is, "How are you guys making money? Because we're struggling." You have to draw a line in the sand with major labels. When our popularity got to the point where we had 4 million views a month on our YouTube channel, major labels or PR people would try to send a band to our show in Chicago as PR, as opposed to doing radio interviews or something like that.

And we said, we'd be happy to have the band on, but we're going to sell the product and give you 50 percent. And the major labels were really against that. So we said, well, then the model's really not for you. You already have a viable model and we'd love to have you on, but we treat everybody the same here.

We work with over 60 independent labels, and have really good partners. The people who are on want to be there. We drew the line and it's paid off. I'm pretty proud of that honestly.

TR: Have the recordings worked as promotional tools?
MJ: People will be watching a livestream and you'll see in the comments they'll say, this is the first time I've seen this band. They're legit, I'm going to go buy a ticket [to their show] in Portland, or I'm going to go buy a ticket in Austin.

We've talked with a lot of bands that have told us, you wouldn't believe how many people have shown up to concerts saying, I saw you guys on Audiotree.

TR: Do you see yourself in competition with platforms like Spotify or Facebook Live?
MJ:
No. Our whole idea and goal is to use those platforms to help our company. Spotify, for example, has been picking up our live sessions, our versions of songs, and putting them on playlists, and it's done huge things for artists who have come on Audiotree. We've had songs go over 1 million streams in two months. We've had others go over a hundred thousand.

TR: What do you see as the future for Audiotree?
MJ:
There's been a lot of inquiries over the years where people have asked us, can you start an Audiotree in Budapest? Or can you start it in Paris? Or Ireland? That's something that could still potentially happen. We do have fans all around the world. There's so much great talent out there, but we can't access most of it unless they have the resources to get on a plane and come to the U.S. So expanding to other countries is something to look to in the future, maybe.

This interview has been edited for length and clarity.