Digital Notes: CD Baby's Sync Payout, De La Soul's J Dilla Tribute and Apps' Ad Economics

CD Baby serves up more than just CDs. The Portland, Ore., music distribution company on Wednesday announced it has paid out more than $1 million in YouTube sync licensing to its artists as of February. That amount has accelerated as CD Baby's YouTube efforts have grown, Kevin Breuner, CD Baby's marketing manager told Billboard. In the fourth quarter of 2013 alone, the company paid out $400,000.

The company started its YouTube program in 2012, identifying cover songs created by the video platform's creators that are based on songs written by CD Baby's 300,000 artists. Once identified, YouTube allows rightsholders to claim the copyrights to those videos and start collecting their share of the money generated by ads displayed on the clips.

"Yeah, $1 million may not sound big, but it’s a matter of how quickly it’s ramped up," Breuner said. "A year and a half ago, this is a million dollars that artists were not getting. To me, this is just the tip of the iceberg in monetizing music of this fashion."

Founded in 1997 as an online store for independent musicians to sell their own discs, CD Baby has paid out nearly $330 million in revenue share to artists who use its services, which now include digital downloads and, most recently, sync licensing. So far, the company estimates that 15 million videos have been created on YouTube based on CD Baby artists' music.

While some music executives remain dubious of YouTube, Breuner is bullish on the platform. His optimism "is based on what is really happening on the ground," Breuner said. "YouTube is where fans go. For some artists, [the money they make from YouTube] outweighs what they make from iTunes."

De La Soul dives into the BitTorrent crowd. The hip hop group is giving their music away again. After allowing fans to download their entire catalog for free on Feb. 14, De La Soul is now handing out free copies of its newest project -- "Smell the Da.I.S.Y." -- on their website

The mixtape consists of classic De La Soul lyrics over vintage tracks produced by J Dilla, an influential hip hop artist who worked with De La Soul. The 11-track bundle also comes with a documentary of J Dilla, who died in 2006. The group says the project is designed to generate awareness for the J Dilla Project, a foundation that funds music programs in inner-city schools.

"Smell the Da.I.S.Y" comes in the form of a BitTorrent Bundle, which has become an increasingly popular marketing vehicle for a variety of established bands, not just indies. Madonna and Moby, for example, have distributed their music through BitTorrent Bundles, which is not to be confused with the open source BitTorrent download protocol.

As with most Bundles so far, "Smell the Da.I.S.Y." is free after the downloader submits an email address to unlock the music files. In the future, BitTorrent (the company, not the protocol) may introduce a pay-gate where downloaders can pay to unlock additional premium content in the bundle, potentially giving artists a new source of sales revenue.

Ads displayed inside of apps are exploding. We all know mobile advertising is taking off. But a subset of mobile ads is growing even faster -- ads that are displayed inside of applications.

Research and data firms App Annie and IDC on Wednesday issued a joint report projecting that the annual revenue for in-app ads will surpass revenue from display advertising on the computer by 2017 in key countries such as the U.S., Brazil, Japan, France, Germany, South Korea, Russia and Canada.

Here's a look at how ads grew in 2013. Revenue from online ads served up on a PC was larger, but mobile is growing a lot faster.

And here's a look at what IDC and App Annie think the chart will look like in 2017. Notice that the solid orange bar representing in-app ad revenue is forecast to be higher than PC display ads represented by the solid blue bar. 

This is good news for music apps that rely on in-app advertising, including Pandora and iHeartRadio.

Overall, 42% of app publishers surveyed by App Annie and IDC incorporate paid advertising, with a small handful making more than $100,000 a month from in-app advertising. Developers in the 75th to 90th percentile of apps can make up to $10,000 a month, according to the report. "Flappy Bird," for example, reportedly made $50,000 a day from ads. If true, that could add up to $18.3 million a year for a single app.