The music industry may be relying more and more on digital formats for its financial success, but physical music database and marketplace Discogs continues to grow its business—and is now making the ambitious case that other verticals should follow suit.
Over the last five months, Discogs has quietly launched five additional marketplace verticals under its wing, including Gearogs (music gear), Filmogs (film), Comicogs (comics), Bookogs (books) and Posterogs (concert posters). All five sites are still in public beta and host only around 20,000 contributors in total to date, but the Discogs team hopes it can translate key lessons from its music-focused growth into these other industries—particularly the value of serving niche interests and leveraging the benefits of open-source communities for fans, rights holders and retailers alike.
Discogs’ sheer size suggests that diehard music collectors are here to stay, at least for the near future. According to its own midyear report, Discogs sold nearly 4.6 million records in the first half of 2017 and, as of press time, lists over 35 million records for sale. The company is currently running its annual September Pledge, whose goal in 2017 is to surpass nine million total releases catalogued on the site by September 30.
Billboard estimated that Discogs generated $100 million in total sales activity in 2016, and then turned a profit based on a simple business model: charging an 8% sales fee (capped at $150 a transaction), while keeping it completely free for users to list new releases on the site. Interestingly, while overall physical album sales as measured by Nielsen declined by 17% year-over-year, Discogs’ own report saw its vinyl sales increase by nearly 14% over the same time period.
In fact, one can connect Discogs’ expansion into a larger marketplace ecosystem—referred to internally by employees as the “META” project—to how the vinyl boom has increased demand for adjacent products and services. For instance, the Gearogs launch was inspired by Discogs’ early community, which “started out as an electronic and drum-&-bass audience,” says Ron Rich, VP of Marketing at Discogs. “We’d talk with these product owners at our live events, and they would tell us they wanted a Discogs for their synths and turntables. We saw a big opportunity there, especially with vinyl sales increasing.”
The rise of Discogs vinyl sales relative to the overall global vinyl business also points to a key fragmentation of physical music consumers that is often left out of blanket industry analyses. Some of the most powerful players driving the vinyl boom are not indie or used record shops, but rather corporate retailers like Urban Outfitters and Whole Foods that choose to frame records as part of a holistic lifestyle choice that touches fashion and health. As a result, posited media industry analyst Phil Leigh, the record shop of the future “may end up looking more like a youth oriented, music-focused Starbucks than a CD record store.”
Beyond physical retail, Amazon and eBay also sell new and used records, but their numbers still pale in comparison to those on Discogs (e.g. as of press time, Amazon and eBay each listed around 100,000 and 425,000 rock records respectively for sale, while Discogs listed over 12.5 million). Indeed, as a company built by and for passionate collectors, Discogs deliberately operates outside of the corporate realm, even if its size might suggest otherwise.
“People going into mom-and-pop record stores are likely different from those buying music using Amazon’s one-step checkout,” says Rich. “The people coming to the Discogs site are mostly searching for unique, rare releases outside of the latest represses.”
Indeed, while Nielsen and Discogs share a few artists on their top-10 bestselling vinyl lists (e.g. The Beatles and Pink Floyd), the former skews much more towards the latest hits from artists like Tennis and Ed Sheeran or film soundtracks like Guardians of the Galaxy and La La Land. In contrast, Discogs’ top-selling vinyls align with claims among physical retailers that new record buyers are not drawn to new releases—although Discogs’ midyear report may suggest a tidal shift in the works, as new release sales on the site increased by a staggering 123.8% year-over-year, far outpacing the growth in catalog sales.
Nonetheless, Discogs’ utility to the music industry still leans primarily on its open-source data around older releases. Reissue labels like Numero Group, as well as larger labels like WEA International with a substantive amount of inactive catalog, regularly monitor which out-of-circulation records have high demand, i.e. showing up most frequently on users’ “collection” and “want” lists—which can provide granular data even down to the level of how many copies of those records the labels should make. In June 2017, Discogs also partnered with Yep Roc Records and Studio One Records to release a reissue of Freddie McKay’s debut album Picture on the Wall as a windowed exclusive before distributing it widely in the U.S., suggesting that the site could also serve as a targeted marketing and promotion tool for labels.
Smaller indie and used record stores are also among Discogs’ most valuable customers. “We want to be a resource for local shops to build an international audience that can access their inventory from anywhere in the world,” says Jeffrey Smith, Head of Public Relations and Strategic Partnerships at Discogs. Record stores from Nashville-based Grimey’s to Paris-based Superfly Records can list their inventory on the site and, in a manner similar to labels, monitor demand for certain records within the context of a wide variety of collections.
Even though Discogs likely won’t be making much money from its five new sites in the near future—selling items in these marketplaces is free, for a limited time—it seems to be cashing in on opportunities to help collector communities that are arguably underserved by the Spotifys and Goodreads of the world, in terms of accommodating for meticulousness and precision. But that’s where the similarities end: managing this new ecosystem will require understanding and serving the unique values and identifiers of collection behavior in each vertical.
“When we first launched Posterogs, we were surprised by the level of specificity the community was looking for in the listings,” says Rich. “They really want to know whether they’re getting poster #1 out of 100 in a collection—or maybe their lucky number is #15 instead. In this sense, serving the poster space is different from recreating a secondhand record shop experience, but that need for specificity never goes away.”
Hence, the main priorities for Discogs in this expansion will be growing supply in the marketplaces, while slowly customizing the functionality of each website to the needs of its distinct community. “The way we’re approaching this is to start small, and just listen,” says Rich. “Our users are like the architects. We’re just the contractors building the necessary pieces for them.”
This article can be found on FORBES.COM