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Adios Big Four?

The Institute for Communication in Social Media, shortly Ikosom, published a blog post named: “Music Crowdfunding and Labels”, at the beginning of June. A survey is planned to be conducted amongst German A&R-and Product managers of around 30 small and big German labels. I think the questions can, at the moment, still be commented on.

A couple of years ago, crowdfunding platforms boastfully announced the revolution of the music business. In the meantime, disillusion found its way to the revolutionaries. ForMyBand, the startup that was founded in 2008 in Berlin, wanted to unhinge the established concept about the music industry being headed towards a crisis. Today it can only be found on a tomb-like web site with the inscription “Germany’s first crowd funding startup closes its doors”. SellaBand, which used to be a forerunner for the crowdfunding guild that operated from Norway, which started in 2006 with the ambitious slogan “Level the playground in today’s music business” (or something similar), had to announce insolvency in February 2010 and was saved by German investors.

Meanwhile, the SellaBand team moved from Munich to Berlin and is again doing well in business. The contestants don’t seem to have such worries, yet no one has really successfully made a big breakthrough. Is the promised revolution not happening? What went wrong with the futuristic model of the music industry? The Ikosom blog post was also a reason for me to speculate deeper about the relationship between music crowdfunding and labels. What interests could labels have from crowdfunding? Or do they think of crowdfunding as competition? Are there any advantages in collaborating or even a synergy between crowdfunding and labels? Can one side or the other simply take over any steps of value chains?

Before we dedicate ourselves more deeply to the questions, we should take a look at the value chains of the music industry. Here, we can quickly recognize where crowdfunding starts, namely with the discovery of the artist, financing of the album/music and the production, which is mostly self-governed by the artist himself. And that’s where the possibilities of crowdfunding are worn out and the decisive steps of promoting and marketing as well as distributing the music, are left to others. Those are, in my point of view, exactly the points where, in the truest sense of the word, the music plays. It’s where the money is made. But it’s also where the supporters/fans are left out of the game. It wasn’t for nothing that Benji Rogers, Co-founder of Pledgemusic, established a record label in order to commercialize the artists that were discovered on Pledgemusic. (Although, only recently did Benji make it clear in an email, that he doesn’t consider Pledgemusic to be a crowdfunding platform). But, where is the supporters’ outrage? Why is it that, analogously to other branches, losses (or in this case the investing risks) are socialized and winnings are privatized? Up until now, the supports, apart from the fewest exceptions, have made no profit off of the artist’s success. A successful investment doesn’t work that way. But, let’s go back to our questions. I think that the business interest that labels have in crowdfunding, is rather low. They don’t necessarily have to fear competition in crowdfunding either. On the contrary, the labels can wait until the artists have gained some fan basis through crowdfunding and then, at the right moment, sign a contract with the artist- without the risk of financing a failed album. The supporters are the one who took the risk up to this point. Please, no misunderstandings, I wish for every artist to make profits out of their music. Surely, I see the synergy between crowdfunding and the labels. Even different points of the value chain can be taken over reciprocally. Though, it won’t work, because the labels work for profit and surely, which is understandable to me, they won’t want to share with the supporters, at least not without being forced to. The revolution of the music business can only come from the bottom. By fans and artists coming together and building a joint, new kind of a label, without mediators. This would surely be, even against the still actual GEMA discussion, an up-to-date answer to joint models of the Big Four, omnipresent music mainstream and the musical united mash on all channels. Additive (08.07.12): I am looking forward to the results of the Ikosom survey.

Welcome to the Niche Market!

After Sven Regener monologued on Bavarian broadcasting about copyrighting and the costless culture on the web, thereby immediately noticing who is taking who for granted, the subject is drawing his crisis. Hartwig Masuch, CEO of BMG Rights Management, is using the fit occasion and demanding in a Handelsblatt interview, more respect towards copyrighting and at the same time wants to make the big internet concerns accountable for copyright infringement, among which Google/ YouTube. However, they’re not the only ones responsible. Also the users, who had no respect towards the creative work of musicians and wanted to access their music free of cost.

The real problem lies much deeper: The label industry was over the years too much tied up to the traditional business models and reacted to the challenges of the internet way too late. Then, the (helpless) criminalization attempts of illegal downloading happened. Possibly, it’s the musicians now who have to pull the chestnut out of the fire. I don’t want to be misunderstood. I am all for paying for music and I bought my collection 100% legally. I think very highly of Google/ YouTube having to pay for the music on their sites, including other internet big shots and any podcast entrepreneur or streaming provider. In this aspect, I even agree with Sven Regener: a musician should be able to make a living out of his music. But, does this add up to the strategy of record firms, who constantly push musicians to make a fast dime? And what about GEMA’s distribution system – is it all that fair, so that even less successful (read: pushed) musicians can live out of the earnings? The debate has only just begun, but now the question is, who has a profit out of this discussion and does it really help improve the user’s willingness to pay and their respect towards musicians? I don’t think so, because it should be more about making music more open, reliving and intensifying the communication to fans. Because, I will only then understand the real value of a musical piece, when I know how much sweat, blood and tears were put in it. And, to complete the thought, this is exactly where the crowdfunding platforms have failed so far. What started a few years ago as a revolution of the music business, didn’t achieve a lot more than financing single projects. Here, the crowdfunding platforms missed their chance to achieve, with new ideas, strategies and concepts, more than just financing an album and building a community around a project, especially for musicians from the independent scene and newcomers. They simply didn’t acknowledge the potential: nowhere else can I come this close to a musician, like for example when crowdfunding an album, only here is such a tight relationship and intense communication with the musician possible and mostly also wanted. This project-fixated approach will, sooner or later, make sure that crowdfunding in music business never overcomes its niche existence.