The success of online music label Sellaband is causing some in the traditional music industry to rethink their approach.

Sellaband allows groups to post music online and lets members of the public invest in increments of $10.

Once the target of $50,000 is reached the band records and distributes an album, with all money from sales, downloads and site advertising being split three ways between the band, Sellaband and the original investors.

"It's an interesting model," a senior manager at Universal told vnunet.com under condition of anonymity.

"People are going to be watching it to see if the principle works and could well be adopting a similar model if it does. But it would mean a rejig of our entire business and that's not something that can be done lightly."

In its first year of operation Sellaband artists have recorded 10 albums, including The Elements by British band Second Person, which is due to hit UK shops next month.

To celebrate the anniversary a concert was recently held in Amsterdam for band investors, known in the trade as 'believers'.

"I'm a believer myself and, while I've not made a profit, I am making money from this," said Pim Betist, co-founder of Sellaband.

"It's basically a selection process. Some sites let listeners vote on music but that doesn't work. People vote best with their wallets."

The label has built widgets to access the site and has its own Facebook group.

Other bands are now breaking out of the traditional record company system. Radiohead has recently put its album online for buyers to download, and set no price – simply asking users to pay what they think it is worth.

Meanwhile Nine Inch Nails was so incensed by its label that it encouraged fans to steal the music.