IODA – the Independent Online Distribution Alliance – is a digital distributor for the 21st century. Founded by Kevin Arnold, who also runs the San Francisco Noise Pop Festival and has worked at both Oracle and as director of data services at Listen.com, IODA’s mission is to help independent labels and bands make their music available for sale through the various and ever-expanding field of digital music stores.

Though I’d known of Kevin and the NoisePop festival for years, I didn’t meet him in person until the Apple iTunes indie label event in June 2003. After a full morning of festivities on the Apple campus, team IODA invited folks over to a nearby hotel for beers and banter. Hours later, about a half dozen of us were eating sushi in a Silicon Valley restaurant that looked more like a Swiss Chalet. I recently had a chance to check in with Kevin and see how IODA was doing. Here’s what Kevin had to say.

Give me the short description of what IODA is.

IODA’s main goal is to be a comprehensive partner with independent record labels, artists and publishers in the digital music world as they face the challenge of developing digital delivery sales as a real source of income. We have the additional goal of making it as easy as possible for digital music services to integrate the music of indie labels and bring that music to the forefront.

How many labels are you working with now?

We launched IODA in May 2003 and we’re currently working with about 60-70 independent labels and a few individual artists. We actually just announced our initial catalog last week and since then we’ve received lots of calls from labels interested in our service.

So you’re also working with individual artists?

Just a handful. For the most part we aim to work with artists who have a certain number of releases and have generated some sales in the past.

Okay. We can talk more about resources for unsigned artists in a bit. What’s the status of IODA right now and the availability of indie music online?

We’re currently working on three tracks at once. We’re talking to indie labels and building out our catalog. We’re simultaneously talking to the various digital distribution services to negotiate deals with them and let them know what labels’ catalogs we’ll be able to deliver. And third, we’re in the last stages of developing the online tools that labels will need to manage their digital catalog, as well as track sales and royalties. These pieces will all be in place soon.

Tell me more about how you plan to make it easier for indie labels to offer their catalogs online.

We’re creating a set of online tools that will help labels make their catalog available to a variety of digital distribution services all at once. Once we’ve established a relationship with a label, IODA does the basic setup work of encoding and metadata entry, and after label approval and input we deliver the music and the information to the digital distribution services that the label has chosen to make its catalog available to.

Our online tools – our “dashboard”—lets the labels manage their catalog information, review licensing agreements, and track their songs and earnings across their entire catalog (is it in real time, Kevin?). (Not real time but as soon as we can get the data, ie more frequently than royalty payments.) It also lets them manage all the assets associated with the artists – press photos, bios, etc. – and update them as needed. Then we make sure that any updated information is passed along to the digital distribution services.

How many of the digital distribution services are you working with now?

We’re just starting our licensing efforts but we’ll work with all the existing big services — Apple, RHAPSODY, MusicMatch, eMusic, the new Napster, etc. — as well as a number of new options coming out soon too. The services are all eager to include independent music.

How difficult has it been to coordinate with the digital distribution services?

Not that hard, actually. There’s a lot that they have in common – a lot of their backend structure and licensing process has been dictated by the major label digital delivery systems. We’ll be delivering info in the way they expect to get it.

Let’s get technical about your partnerships with indie labels. How does IODA get paid?

IODA is working on a percentage fee based on online sales. There are no upfront costs for the labels that agree to work with us, which means we’re doing all the front end work – the encoding, the metadata collection, and so on – for free as an investment in the catalog. I should mention that there are other services like IODA out there, but many of them charge an upfront cost, in some cases upwards of $100!

That’s insane.

That being said, IODA does have limitations about who it can work with. We’re trying to work with indie labels because they usually represent a certain number of bands and a specific catalog. It’s hard for us at this early stage to work in partnership with individual artists. CD Baby is the best option for unsigned or indie artists. Though they have an upfront fee, it’s a reasonable one, and Derek Sivers is offering a great profit split rate on digital distro sales through iTunes.

I agree! How do the labels get paid for sales and downloads?

Labels will get payments from us quarterly, which reflect the general payment schedule that the digital distribution services have in paying out for sales.

What kind of terms are your contracts with the labels you partner with?

Terms of our agreements are as flexible as we could make them under the circumstances. On the label end, the term for our agreement is three months with auto renewal every quarter. When dealing with services our goal is to generally negotiate short terms, so a label can expect to be obligated to participate in licenses they agreed to be a part of for a year in most cases.

Piracy is a big issue. On one side we’ve got the RIAA and their very heavy-handed legal strategy of going after "significant infringers". On the other side we’ve got a lot of people out there who justify their use of peer to peer services because they think that CDs are overpriced, that major labels are ripping off artists, that radio just plays pabulum and it’s a place to discover and share new music. And third is the economic reality that retail sales are down 15 percent this quarter AGAIN, and I read that 1000 retail stores have closed recently. You’ve been in the space a long time – what do you see as the best possible way to fix this?

Well, I’m not surprised about the level of piracy, or that 65 percent of music file sharers "don’t care" that they’re trading copyrighted files. That reflects the mainstream thinking. They’re listening to Jay-Z and Britney, the same artists that they see on MTV Cribs. When all artists look like they’re rich, I can see why people don’t feel that bad about what they’re doing. That’s also a reason that I don’t think the RIAA’s education campaign about piracy is going to help much.

I think the indie community works on a different set of principles. Bands and labels have a closer relationship with their audience and I think in many cases they’re making music that’s aesthetically more appealing.

What’s the solution to the piracy problem? I think there will always be a war to infiltrate the P2P systems and degrade the experience for the downloaders. Controls against piracy have never really succeeded in quashing piracy. And quality always wins out.

I think the bigger difference will come as we move into future and young people who are downloaders now mature. It’s true, you can find anything you want on the P2P networks, but you can waste a lot of time doing it. As they get older they’ll have less time and more disposable income, they will begin to appreciate getting quality tracks through a reliable and easy-to-use system.

Thanks Kevin! Visit IODA online for more information.

Read a parallel interview with the Digital Rights Agency or this interview of Derek of CD Baby about their new digital distribution project.