Ask HN: How much revenue should we give to content creators?

[songism]

I cofounded a yet-to-be-released web application with a friend. It's yet another music streaming service for independent artists.

So far we've agreed that we should distribute 70% of the revenue generated from song sales to artists.

I don't think this is enough though -- I think we should distribute some specific percentage of our total revenue (including song sale revenues and advertising revenues) -- maybe 50% or more -- to artists. But my partner disagrees. He says that doing so would be generous, but wouldn't make sense financially. He argues that it would be absurd to pay artists more than the business is making itself.

I think that it wouldn't make sense not to pay artists more than the business is making, since the only reason artists and users would use our site would be to share and discover new music, something our business takes no part in creating. I think it's in our best interest to be fair to artists because they'll reward us with loyalty to our service.

Anyways, it's difficult to find a balance between how much revenue we're pulling in and how much we're willing to pay out. We host the music files for free (maybe not a good idea), we offer song downloads for less than half of the industry standard, and we offer a good recommendation system to help users filter through all of the music.

Any ideas about what we should do?

[ld50]

"So far we've agreed that we should distribute 70% of the revenue generated from song sales to artists.

I don't think this is enough though -- I think we should distribute some specific percentage of our total revenue (including song sale revenues and advertising revenues)"

>not important

"Anyways, it's difficult to find a balance between how much revenue we're pulling in and how much we're willing to pay out."

>this is the real issue. forget your first question.

[ld50]

i think you should do a cost analysis from a user standpoint of competing services. once a "fair" or "market" rate has been established, i'd then adjust your price significantly below that (of course you can't forget to maintain sufficient cash flow to stay afloat). then market the hell out of your service (make sure your service is on par with that of your competition). once you've established yourself as a leading marketplace for online music, develop a significant competitive edge and you'll be free to adjust your pricing structures upwards, as long as you monitor your attrition rates to make sure the market believes your tax increases to be "reasonable". keep in mind your competitive edge could be something as simple as "well, we've made ourselves the largest marketplace for online music". etc, etc, hire me as a consultant and give me an equity stake. etc, etc.