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Pledgemusic – Did They Line Their Own Pockets?

… or: Bang Goes the Money Again!

An essay about the end of Pledgemusic, Sellaband and of music crowdfunding

Almost ten years after being founded, one of the last pillars of music crowdfunding is starting to crumble. Even when those behind Pledgemusic, especially its co-founder Benji Rogers, vehemently denied operating music crowdfunding, the platform was always being mentioned in the same breath as the former (Sellaband, MyMajorCompany, AKAmusic) and current (Indiegogo, Kickstarter) leaders of the branch. As early as the summer of last year, artists proclaimed that Pledgemusic still owed them money which was collected from fans.

In light of the already announced bankruptcy, this is another chapter for music crowdfunding which is sadly coming to a close now. Moreover, it reminds us of the eerily quiet conclusion of Sellaband just a few years earlier. The parallels are astonishing and at the same time surprising. Musicians are not being paid. There have been wordy apologies and stalling strategies from the side of the platform, but these are never followed by any real results. The funds from the supporters were apparently never kept separate from the operating capital. Catastrophic crisis management, lost trust, coupled with a management incapable of getting a handle on things will lead to the obvious and inevitable end of Pledgemusic. I still hope Pledgemusic will disabuse me.

But no one learned from the Sellaband debacle. Maybe or perhaps because Sellaband died a quiet death.

What went wrong and what were the causes of the crisis of Pledgemusic – an initial analysis:

Artist are not getting paid

It is obvious that the financial management of Pledgemusic was not able to manage the funds from supporters (Pledgers) properly, as deemed appropriate for a prudent businessman, and pass on the funds to the artists. It is even more surprising when taking into consideration that the managing of such financial funds makes up a large part of Pledgemusic’s business model. This is not only sad, but also frustrating for the artists who were not able to finalize their projects or who were forced to finance them by investing even more time and effort. Let us hope that there is still something left for the artists at Pledgemusic.

What are artists‘ options now:

  1. Back in February, Sound Royalties advertised effectively that it would give out advance payments to artists … in the form of a credit.
  2. Each and every artist should decide whether or not they need an intermediary (crowdfunding) platform that charges a fee of up to 15%. Perhaps, they would be better advised to use their own internet presence and social media channels for a more personal version of crowdfunding or for pre-sales. This seems to be both more secure and more promising.
  3. For those of you who do not want to go without a crowdfunding platform, you should take advantage of an established player in the market: Kickstarter and Indiegogo could be some alternatives. But, each and every artist should examine in detail how the financial funds are managed and, when in doubt, contact the platform directly.
  4. Use Bandcamp`s pre-order tool. At least you are established and equipped with a decent fanbase.
Funds from the supporters have vanished

Supports are just as affected considering that they trusted their hard earned money to Pledgemusic and are now quite probably waiting for an album or their rewards in vain.

Sellaband set up a notarial escrow account when it was founded where the funds from supporters (Believers) should have been deposited until the successful conclusion of a project and it was time to pay the artists. These funds were thus kept strictly separated from the operating capital of Sellaband. However, towards the end, these safety measures were also circumvented by Sellaband so that artist were not paid and the funds from Believers vanished. Pledgemusic finds itself in the exact same situation in that there is currently no apparent separation between such funds and the operating capital.

Moreover, Sellaband did not quite understand how to score using the escrow account and stop the (double) bankruptcy. An escrow account seems to have never even been an option for Pledgemusic.

The separation of operating and crowdfunding funds is essential for the crowdfunding model and should be demanded by both the artists as well as the supporters. Otherwise, there will always be cases like Sellaband and Pledgemusic in the future and the funds from supporters will still not reach the artists but line the pockets of the platforms.

By the way, every Pledger should write off their funds pledged and use the last days of the platform to secure their album downloads. That is all that can be done.

Wordy apologies from the platforms

… and stalling is often done, but is still not a useful tactic. Neither Sellaband nor Pledgemusic was successful in finding acceptable solutions for both the artists and the fans during the corresponding crises. Sellaband already got so little attention during the (last) crisis that the deceived artists did not get nearly as much public attention as the artists from Pledgemusic do now. There were also artists from Poland, Australia and Germany who were less well-known beyond Sellaband and who feared for their reputation.

Unfortunately, it seems that the legal steps to assert claims were not very successful due to the fact that Sellaband no longer had any assets. The statements given by Pledgemusic and co-founder Benji Rogers did little to console the artists and the supporters. They were, under no circumstances, capable of regaining lost trust.

Lost trust

The most damaging thing for artists and fans (apart from the lost money), but also for Pledgemusic and crowdfunding as a whole, is the loss of trust. Crowdfunding platforms, as intermediaries between fans and artists, cannot limit themselves to the artistic or communicative element of crowdfunding. This discussion has been going on for years, especially when another Kickstarter project turns out to be a fraud. The handling and management of financial funds is a crucial part of the business. Trust is of the utmost importance. An almost year-long payment problem, which is talked about in large parts of the music industry, is associated with a considerable loss of trust. The breaking point has now been reached with Benji Rogers’ announcement of the bankruptcy. It is doubtful that this lost trust in music crowdfunding can be regained. The damage has been done and is difficult to repair.

If UK Music now demands that the British government should order an investigation into the Pledgemusic case, then it is only fitting. Unfortunately, the umbrella association only represents the side of the artists, so that the interests of the supporters are probably not in the focus and will fall by the wayside.

The consequences:

  1. In the future, crowdfunding platforms will have to consistently manage operating capital and funds from supporters separately. These funds simply do not belong together. Notaries or trustworthy trustees must be appointed as administrators of crowdfunding funds. Entrusting the platforms with this separation did not work out in at least two cases now.
  2. The separation of funds must be communicated in a transparent manner and must be verifiable at all times. This open communication should be possible. Verification is certainly difficult, but not impossible.
  3. Consideration should be given to setting up an advisory board to monitor the platform and, in particular, the financial transactions related to crowdfunding projects. The advisory board should consist of representatives for the artists and supporters.
  4. The CEOs of the platforms must be assisted by financial professionals who are responsible for the management (and separation) of the funds.

Pledgemusic (and also other music crowdfunding platforms) have always advertised with their expertise and contacts in the industry. As we can now see, this is only part of the success. The economic know-how and experience in the field of finance is just as important. Maybe the public pressure in the case at hand leads to a fundamental change in crowdfunding platform’s dealing with the funds of supporters and artists.

Music Crowdfunding - connect it with your real world

Combine Your Worlds – 3 Tips for Your Crowdfunding

Crowdfunding is, briefly put, street performances online. This, of course, sounds a bit strange but it is true. With crowdfunding, generally all you are doing is presenting yourself and your music … in front of a worldwide crowd. And while you are doing this, you are passing around the hat.

Even though the majority of your crowdfunding campaign takes part online, meaning via the crowdfunding platform, social networks and through email communication, you should not underestimate how much the real world can influence the success of your crowdfunding.

Of course, you are going to ask your family, friends and acquaintances to support your campaign when you see them. But the same applies to your fans; you should not just ask them for their online support.

Here are my three tips on how you can incorporate the real world into your campaign:

1. Use gigs to advertise for your campaign
lilabungalowkarte_seite_1
This is an example for a flyer (order sheet) the band Lilabungalow used for their #VINYLBACKEN campaign on German crowdfunding platform Visionbakery

Just as it is in the online world, the same is true here: don’t spam. This means that you do not take every suitable and unsuitable chance to annoy people with your campaign. But still, you should explain what drives you, your activities and your goals. And you can get your fans in the know when they are attending your gigs.

However, there is still room for more: Design flyers which you can pass out at your gigs. You can use them to advertise for your campaign or you can do like the band Lilabungalow does at some of their gigs and immediately take up some donations and hand out reward coupons to your fans.

The flyers can also be used to expand your pool of email addresses. Ideally, this can be done by incorporating a QR code which leads your fans directly to an email registration site. Maybe you can reward them for registering by offering them a free download of one of your songs.

Generally, you should plan a crowdfunding campaign for the long run. This means start early with collecting email addresses. A list of emails with numerous fans does not only increase your chances of successfully completing a crowdfunding campaign.

2. Let fans take part in your life

This does not mean that fans have access to the darkest corners of your private life. The rewards which you offer during crowdfunding will only bring in as much money as they are worth to the fans. The value of a CD or a T-shirt is always compared to similar products. This is, for example, why it is difficult to raffle off a T-shirt for 100 €.

This is why the rewards should always communicate something unique and have a personal added value. You should begin well in advance before the launch of your campaign with collecting personal things from your musical career. Things such as signed drumsticks or an old guitar which has its own story and has been signed can be the star prizes among your rewards. And, they do not cost you a lot when compared to other rewards which you must first have produced. Let your imagination take hold of you and ask your fans what they would like to have from you.

3. Pass on your experience

If you have successfully completed crowdfunding in the past, speak up or write about your experiences. Even if you are in the middle of a campaign, it is sometimes helpful to talk or write about it. Artists who are considering crowdfunding are thankful for any tips and knowledge they can gain from experience. This way you can possibly avoid the one or the other mistake. Use your blog, your contacts to other bloggers or other media. A real worthwhile summary about their crowdfunding campaign using Kickstarter was written by The Doubleklicks.

Maybe you also have the option or the contacts to pass on your own crowdfunding experience in the form of workshops. Furthermore, here you can make contacts and and gain feedback.

If you want to support other artists as a mentor with their crowdfunding campaign, then please get in touch with me. As an artist with at least one successfully completed crowdfunding project, you have the chance to pass on your knowledge and your experiences using music+crowdfunding.

As an indie artist, you should definitely take advantage of what established artists or superstars rarely have and that is the closeness to your fans.

Lilabungalow #VINYLBACKEN campaign on Visionbakery

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