The claps from the crowd reached a deafening roar. The band shuffled onstage. Before they could even pick up their instruments, the audience was applauding. And applauding. And applauding. The lights dimmed, the spotlights came on, and the first note was played.
And now, a word from our sponsors: This concert was brought to you by… you.
Unless you’ve been living under a rock, you’ve no doubt heard the term “crowdfunding” thrown about in the press as the finance revolution sweeping the start-up sector. Maybe you’ve even tried your hand at raising money on one of the many platforms now available. These platforms bring together people with ideas and people with money. You publish your project (which could be a business idea, a product that needs manufacturing, a cultural event), and investors contribute/invest if they like it. The minimum amount entirely depends on the project and on the platform, but could be anything from $1.00. So, it is something that conceivably you and I could do. We contribute according to our interest and means, and in exchange we get a thank-you/product/shareholding.
I recently backed a card-game idea on Kickstarter. Why? Well, it appealed to my sense of humour, and I succumbed to the sense of exclusivity that only backers would get one of the first sets ever made. For $20 (plus shipping) I get an original, not-available-in-stores deck of cards mailed to me. I thought that sounded very cool. It turns out I wasn’t the only one. This particular game wanted to raise $10,000 to be able to get the cards manufactured. They ended up collecting $8.8 million, all from people like me who liked the idea and could afford to spend between $20 and $500 on something that made them laugh.
Stories like these abound, of runaway successes and dreams come true, thanks to the funding power of the “crowd”. And the beauty of the concept is not only in the access to funding for original ideas. It’s also in the access to market opinion. By contributing, the “market” is effectively declaring whether or not there is demand for a product or idea, whether or not it’s economically viable. Even big brands, who don’t need the external financing, are turning to crowdfunding, to market test an idea before committing to it.
Fine, but is live music a “product” or even an “idea” that can be crowdfunded? Yes, and very successfully.
Known as “fan-funded music”, the concept allows bands to ask their community, “Do you want this?”. The fans vote with their wallets, by buying concert tickets in advance, or by paying for an album before it’s even made. If not enough money is collected to finance the production, the concert doesn’t go on, or the album idea gets shelved, and the fans get their money back.
The concept significantly reduces risk. The band doesn’t have to invest in venues and personnel unless they collect enough to cover their costs. Any amount above that, is profit for them. And an artist doesn’t need to spend on studio recording time unless he or she is sure that there’s enough demand for the resulting album to justify it.
The fans pre-pay for the experience. In exchange, they feel part of something, they “connect” with the band/musician. It is so much more than just “buying a ticket”. They are literally investing in the band, sponsoring the music, funding the creativity. It’s a good feeling, and makes for a more loyal and intimate following than merely buying (or downloading for free) the latest chart-busting output from the big labels.
The emotional benefits for the bands/musicians are also considerable. They can now reach out directly to their community, through email, special community events, a personal touch. Very few musicians start out in music to make money. Most hope to earn enough to keep on making music, that would be success for them. Their motivation is the connection with the fans, the knowledge that they make a difference, that the world is a better place to some people because of their music. Through crowdfunding the fans are telling the creators, “I want you to continue doing what you’re doing because it’s important to me”.
How do you put an economic value on music? What is a song worth? $0.99 on iTunes? No, it’s priceless to some, and worthless to others, and fixing an economic value changes the proposition. With crowdfunding, and the connections that it offers, it’s not so much the amount asked for or even contributed that’s important. Most crowdfunding platforms allow the fundees to stipulate certain rewards for certain amounts contributed. Many musicians on crowdfunding platforms offer the download of the album in question for only $1. For higher contributions, you get additional stuff and/or privileges.
- A physical CD
- A signed physical CD
- T-shirts, caps, mugs with the band’s logo
- An invitation to come and hang out in the studio with the artists
- Signed drumsticks
- Old band equipment
- Lyrics hand-written by a band member
- Candid photographs of the band/musician recording or rehearsing.
- A chat via Skype
- A private performance via Skype
- A cover song of your choosing
- A birthday wish video
- Lunch with the band
- Back-stage passes
- A live show in your living room
For fans, these perks are fun, but rarely are they the main motivation behind the contribution. We pay for the emotions the music makes us feel, which I suppose puts the “new” music business right in the “experience economy” category. We pay for experiences, because the emotions these experiences generate are a large part of what gives our life meaning.
Musician and artist Amanda Palmer gave a moving TED talk encouraging artists to simply ask for funding from their fans, to believe in themselves enough to know that their fans will help. “When you understand that asking isn’t fundamentally greedy, and isn’t just taking, that it’s actually opening up a space for connection, it changes the whole way you look at the world.” And she should know. Her band raised $1.2 million on Kickstarter in 2012, when all she was asking for was $100,000.
Radiohead trailblazed the “new financing” of albums in 2007 with the release of their album “In Rainbows“. Fans could download the album without paying, although they were asked to contribute what they thought it was worth. Radiohead made more money on the downloads and box set pre-sales than they did on their previous album, including physical sales. Lead Thom Yorke released his solo album “Tomorrow’s Modern Boxes“, not via the standard streaming or downloading sites (Spotify, iTunes, etc.), but through streaming channel BitTorrent, which was pioneering it’s new payment gateway. For this album, with 8 songs, Yorke charged all of $3, and received an estimated $20 million.
The number of platforms for crowdfunding music is increasing, fuelled by and fuelling the interest in this “new” form of financing (I’ll post a more detailed list soon, but meanwhile, some of the main ones focussed on music are Pledgemusic, ArtistShare and, of course, Kickstarter and Indiegogo). And the scene is getting innovative: Bandcamp allows musicians to run their own online stores, and subscription services. Rocketfuel encourages monthly contributions, which collectively amounts to what looks very much like a salary. Patreon ($15m of VC funding in 2014) allows fans to pledge a certain amount for each release. If 100 fans pledge $10 per “thing” you release (a song, a video, a podcast, a poster), and you produce, say, 5 “things” a month, that’s a pretty good salary. Musician and artist Amanda Palmer, who for years has been releasing her music for free on YouTube (and struggling to make a living), has 1,400 backers who have committed to paying her a total of $13,000 per “thing”.
In light of the turmoil in the music industry, with downloads and streaming decimating record sales and with the concert business becoming both more concentrated and more fragmented, it seems that we may have found a replacement revenue stream. Finally, we may well have the potential answer to the question of how musicians can make money in this age of freebies and copying. As Amanda Palmer says in the conclusion to her talk: “I think people have been obsessed with the wrong question, which is ‘How do we make people pay for music?’. What if we started asking, ‘How do we let people pay for music?’”
Things do not look good for the big labels, and fewer artists will depend on their promotion machine. But thanks to the connectivity of the Internet and the evolution of crowdfunding platforms, a wider range of musicians will be able to continue to do what they do by relying on the support of their fans, by asking and by saying thank you, by connecting and by giving. Which is how it should be.
(This post appears in Spanish here.)
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For more on crowdfunding and/or for more on music, take a look at my respective Flipboards: