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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.

New @Kickstarter – Reviewing the most recent music crowdfunding projects

Here are my short reviews of the latest music crowdfunding campaigns on Kickstarter:

„Girl“ – by Jarrod Milton & Meya
– the pitch video is quite unpersonal
– I don’t understand what „Girl“ is about
– more time and efforts should have been invested in creating the rewards
– the campaign is obviously addressed only to friends and family
– no project FAQs
My prediction: not successful
My recommendation: don’t pledge

Re: Bach
– no pitch video
– project description is too short, more information would be great
– only 3 rewards and quite expensive
+ project FAQs
My prediction: rather not successful
My recommendation: don’t pledge

Birth of MiLawd. Reggae/Dancehall Album
– the pitch video is quite unpersonal
– the project description is quite unpersonal, no call to action
– no project FAQs
My prediction: not successful
my recommendation: don’t pledge

Mike Brunacini – Cherry Springs
– pitch video by Bruno is quite alright, but echoing the project description isn’t very cool
+ project description is OK
– no project FAQs
– rewards are only available for US fans
My prediction: with some changes the project could be successful
My recommendation: do pledge, if you like Powerpop and live in the US

Support The Dream
– the pitch video doesn’t have a message
+/- the project description is personal, but should be more about the music
– no project FAQs
– more Rewards
My prediction: with a good deal of work and creativity the campaign could be successful
My recommendation: wait and see how it develops, maybe pledge later

Travelling Marionette Band and Artists
– no pitch video, a video would definitely make the project more vivid
+/- probably a cool project if you read the description
– only available in AU
– no project FAQs
+/-more work should be invested in creating rewards
My prediction: not successful
My recommendation: don’t pledge

A Night to Remember
– no pitch video
– almost no project description
– almost no rewards
My prediction: not successful
My recommendation: don’t pledge

1431: The Road Less Traveled
+ very personal pitch video
– there should be more details in the project description
+/- cool rewards, but no rewards for less than 25 $
My prediction: successful with some upgrades on the project page
My recommendation: pledge if you’re into country/folk

The Agony of Choice … to Find the Right Crowdfunding Platform

A few days ago, Fiona Zwieb introduced musicians to three of the largest crowdfunding platforms (Kickstarter, Indiegogo, Patreon) for their music projects in the DIY musician blog. Sadly, this falls a little bit too short. One of the most important aspects of preparing crowdfunding projects is, without a doubt, choosing the right platform. There is no such thing as the only one. Use the following criteria when making your choice:

  1. Will I reach my fans? An important aspect for the success of a crowdfunding project is activating the existing fan base and gaining their support. After all, the largest portion of your funding is going to come from this source. It is, of course, important to know who your fans are, where they live and whether or not they have easy access to the platform (such as language and handling of payments). You will surely tell your fans about your project through your website, project related email newsletters and through your social media channels (Twitter, Facebook, Youtube, Soundcloud, …). But, you will want to communicate with your fans through the crowdfunding platform as well. Naturally, this should take place in an environment where you both feel comfortable.
  2. The type of your project – Most of the crowdfunding platforms offer a large range of product categories for creative projects. It does not matter if you are funding just a music project (album, EP, tour) or collecting for a larger project layout which includes other art forms such as dance or theatre, an overview of the various platforms will pay out. Some platforms have specialised in music projects. The founders of these platforms often have a background in the music industry themselves, thus, likely have relevant contacts and can step up with branch experience. This is often not the case with platforms which cover everything from technology to social ideas and art.
  3. Platform support – Here, drastic differences between the platforms can be found: from engaged well-rounded support to a complete lack thereof, you can find it all. The well-rounded support includes support during the preparation phase (video, design and texts within the project profile), tips during the project (e.g. concerning how to increase reach and proceeds) and a final discussion. However, this service is often reflected within the platform fees. This is definitely something crowdfunding novices should consider. Experienced DIY artists can achieve substantial crowdfunding proceeds without such support. And, thus, save on platform costs which would otherwise reduce the project proceeds.
  4. What does it cost? We have now reached a crucial point when deciding for or against a platform. During the preparation phase of every crowdfunding project, a calculation should always be made. It is here that the more substantial costs will need to be documented, such as, for example, for production and for the shipping of rewards. The costs for the platform and handling of payments, to be paid by the project initiator (artist), are also a relatively substantial cost. This can be between 7 and 18 % of the funding sum and in extreme cases even up to 31.5 %. This simply means that this money is not available for the actual project. In some cases, the supporters must also help with the costs which could lead to the project not being funded or only being funded to a small amount.

These are just some of the questions which you should ask yourself during the preparation phase for your crowdfunding project. If you need some help or have any questions, then just contact me at mario(at) musicandcrowdfunding.com. Within the next couple of days, I will introduce some crowdfunding platforms here which are especially suited for musicians.

The One-Step Program towards Success in Music Business

There are many lists and advices going around the internet, which are supposed to help musicians overcome the steep ways of the music business. They consist of some more and some less helpful tips (from five up to 20). Actually, most of them are obvious banalities that could work for the marketing of any given product.

Here, I want to oppose those with my One-Step Program: “Act professional!”

And it is really easy to implement, by the way: The central starting point on the web has to be one’s own internet site. Its basic design should consist of bio information, music, pictures and gigs. There probably is a talented web developer/-designer among the friend circle, who can draw that up. All social networks should lead to your website. It’s not necessary to appear on every social network, however Facebook, Twitter and for musicians also important, Reverbnation or Bandcamp, are a standard. Fans are the most important capital a musician can have. Contact with fans should always be a number one priority- but in a modest way, not by spamming (this also includes adding to unnecessary facebook groups)… and being reachable for fans always and through all channels. These are only a few relatively banal things that need to be taken in consideration. And in this case, one which always applies online as well as offline: professional appearance, even if behind the stage this doesn’t always go so smoothly. The fan should notice none of that. At crowdfunding this is decisive for everything, even success or failure. A professional appearance should be a standard in this matter as well. Here, an example (not from music crowdfunding): I am one of many, many backers of Double Fine Adventure on kickstarter.com. Not because I’m a gaming fan actually, but because this project (Attention!) made an extremely professional impression on me. Somehow, an email from this project stayed in my memory, an email after which all backers living outside the North American continent, had to pay extra 10$ shipping fees. I was certainly not thrilled to have to pay for something once again, which explains my partial amnesia. 🙂 However, this amnesia ended yesterday so I asked the DFA staff about it via the Kickstarter mailing system. Promptly, meaning within a few hours, I received an answer (1. proof of professionalism) with a link to a website, on which I could type in my backer email address and be forwarded straightaway to payment per credit card or PayPal (2. proof of professionalism). Surely, someone might object that it’s a piece of cake to do so when you have a 3, 3 Mio. $ Budget. Could be, but I think that nowadays you can have a successful (and professional) online appearance even with a small budget…. Besides, the rest is commitment and hard work. For questions and advice – cost-free - you can contact me on my email address mario[at]musicandcrowdfunding.com