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.