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BAMM In-Depth: Crowdfunding

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“What made me want to use the site? I didn’t feel like I had much of a choice. And I’ve since come to see the Indiegogo model as a sort of great Darwinistic-artistic trial. If there isn’t enough interest amongst fans, family, friends or colleagues in the project to raise the funds you require, then it’s possible the project was never meant to be. Mostly I see the process as fair, and infinitely more reasonable than the way films have been funded in the last century.”
Benjamin Shearn, 100% Silk videographer and editor

Crowdfunding has only got bigger since it came into prominence around the start of the global recession, with the launch of IndieGoGo in 2008. More and more bands and solo artists are turning to the crowdfunding model in order to finance their musical ambitions. Research from Venturebeat last year revealed that 68 per cent of the music campaigns on Kickstarter are successful. Music is one of the most competitive mediums, but it has also reaped some £36 million in donations on Kickstarter alone since the site’s inception. It’s a truism that bands must tour to make money instead of depending on record proceeds. Sites such as IndieGoGo and Kickstarter offer the chance to have money beforehand to set off the inevitable losses of touring, and making a record which – if successful – is likely to be downloaded illegally. The sites market themselves as fail-safe – the product gets a stamp of approval and bands get paid ahead of delivery. They act as “shop windows” for music lovers. But what about the argument, made famously by Steve Jobs, that consumers don’t know what they want before you give it to them. Is crowdfunding the way forward for all types of music artists? What happens to the traditional process of development? And what is the future role of the music label – if there is one at all?

Crowdfunding can be liberating and daunting for bands, depending on how much they are used to taking control of the process. One of the most revolutionary aspects is that it allows bands to “road test” their material beforehand with potential audiences. Design blogger Don Lehman has modelled the process of developing a product through the site, highlighting that campaigners must be able to show that they are working with a viable product to even begin raising funds. Does this put pressure on artists and bands? And does the system work for complete newcomers?

Glasgow-based musician DFRNT has previously released records through the label Echodub but found that he was unable to get money for the distribution and manufacture of his latest album. He had already put together the album when he decided to launch an IndieGoGo campaign. He told us: “Allowing people to essentially buy the album up front was genius. It meant guaranteed sales and a guaranteed audience (of at least a couple of hundred people) even before the CD was in existence. Not only that but that funding meant the ability to press enough to create a proper run of CDs and potentially vinyl – so there was possible long-term benefits as well as the instant gratification of support from fans who essentially put their trust in me to deliver a worthwhile project.”

So far, so good. But would he advise a relative newcomer to use the site? “Echodub and my work as DFRNT did have an initial fan base, so for a brand new label or producer it might be harder to get things off the ground, and I can see it being a major challenge, so it’s probably not an ideal solution for those new to the market. Not without some popularity surrounding the name or some hype on the release, and the more that people pick up on Kickstarter style funding, the less of a big deal will be made of it, and the less newsworthy it’ll be come.”

Crowdfunding will eventually become a harder option for bands, especially as more established artists disenchanted by labels will come on board. So what can a band do to increase their chances on the site and is the hard work worth it in the end? One of the major differences between IndieGoGo and Kickstarter is that the former gives artists the donations, whether they hit their target or not. This might be a fairer system given how much graft goes into getting a campaign off the ground in the first place. Speaking at a SXSW panel on crowdfunding, Kevin Breuner commented: “The crowdfunding project is easiest for solo artists. The challenge I found was how was I going to make this work with all of [our band] being represented well. A lot of the prime examples were solo artists who are good with people and on the internet.”

The role of fans is key to funding and development now. One of the major justifications of downloading has been the high price of CDs. Crowdfunding sites almost offer fans value-for-money by making the processes of manufacturing and distribution transparent – and cheaper. More significantly, rewards act as a way of encouraging donations, allowing fans to feel like their support is being recognised no matter the size of their contribution. But how much do bands really get out of campaigns in the end if they locked into a Groupon style redemption deal? The artists and producers we spoke to saw the rewards as incentive, rather than bait, to continue investing in the artist. Ben at 100% Silk said: “We kept the rewards simple, and also made sure to keep the value somewhat below the cash amount. I wanted to avoid the potential ‘bribery’ aspect of the perk system. Maybe I’m passé in my thinking, but it’s important that fans and funders really do have an interest in the finished film and aren’t just there for prizes. A film’s life doesn’t end once it’s funded and I personally would like to know if there will actually be any audience for it! Again, it goes back to this idea of artistic Darwinism. I think it’s best to keep the perks appropriately valuable but mostly just symbolic. That way it gives the filmmakers and producers a better idea of the genuine interest that’s out there.”

However, it might be more common for lower-key artists to offer up rewards which outstrip the value of donations. DFRNT commented: “My goal was to make [the rewards] appealing, without leaving me completely out of pocket. I wanted to have plenty options so I looked at what I had and what I was aiming for and based it from that. I also checked a few other campaigns to see how they were handling that sort of thing, and I was always conscious that I needed to give people almost more than their money’s worth so that investing in the project seemed like a no-brainer.”

Amanda Palmer is one artist who has embraced the model enthusiastically, seeing it as a way of realising her numerous projects and her own personal ‘brand’. She managed to raise over $1 million, starting with the relatively low-goal of $100,000, to fund a book launch and accompanying tour and album release. Fan-funders contributing $1 were entitled to a digital download, while $5,000 entitled fans to a private show in their home. Palmer raised over $4,000 in $1 dollar contributions alone. She was criticised for taking advantage of the crowdfunding avenue while she was on a label already. The polymath wrote a blog reply breaking down the costs of giving and shipping for free the gifts, and concluded that she would have less than $100,000 left from the campaign for her own ‘pay’.

Surprisingly, losing creative control is not considered a major concern. Ben believes that collaboration can work well, especially given the nature of the film medium. DFRNT also describes it as a enjoyable factor, and has shown fans album artwork beforehand to garner their response. Overall, it seems agreed that the process offers more control to artists than ever before, over every aspect such as the artwork, the overall design, and the music itself.
However, the price of creative control and ‘instant gratification’ could mean that projects have a limited lifespan. If bands factor in rewards and leave themselves the 20 per cent cushion for unforeseeable expenses advised by crowdfunding author Scott Steinberg, they are likely to have little money left for publicising when they have finished giving out rewards. Comfortingly, previous form is no absolute guarantee for funding. Relative unknowns Five Iron Frenzy campaigned for funding for their album, exceeding their initial funding goal to collect some £250,000. What made this possible was their smooth carefully co-ordinated approach to eliciting support. In comparison, Public Enemy was forced to lower its fundraising target by more than $100,000 from $250,000 to $75,000.

Despite all these caveats, there seems to be considerable optimism in the industry about what is achievable through these sites. There appear to be few cons. The main issue with crowd-funding has been that perception of it as ‘begging’ has been slow to shift, alerting more innocent consumers to the grubbiness of the music industry. The perception of crowdfunding as a last ditch option still persists. Writing for FACT, Angus Finlayson argued that the joy of much music comes from its mysteriousness. He cites artists like tricksters Hype Williams who like to to mess with fans’ expectations and not give them exactly what they want.

But more musicians see crowdfunding as a route to full independence- or negotiating more favourable terms with labels. Amanda Palmer’s Kickstarter campaign featured a picture of her holding up a sign saying ‘This is the future of music.’ After exceeding her campaign goal, she handed control over the marketing and distribution to the established British label Cooking Vinyl, which works closely with artists on controlling distribution and sales.

Sites are likely to become increasingly competitive, as bands fight for a good position from which to get noticed and the social networks on them become stronger. The lure of labels is unlikely to go away, despite persistent debates about their usefulness to artists. Writing for the Guardian, musician Helienne Lindvall argued that labels still have a significant role in helping artists develop. They are also have expertise in marketing and development which few crowdfunding services can offer. Others envision a completely different model, where bigger bands themselves could help support smaller ones in the musical ecosystem.

Ben Folds Five told O Music Awards : “[Crowdfunding] crazy stuff, but the music business will be the same. This is not different. This is just one set of douchebags going under, and another is going to rise. In the chaos, it’s exciting. There’s a moment for a certain class of musicians to get their stuff out there, but, again, back to the band next door: If they put something up on Kickstarter, what’s going to drive anyone to it? So it’s just now up to us — the bands that are stepping up and doing it in this way — we have a responsibility to reach out a hand and do something for the talent below. Because, like them or not, that’s what record companies used to do.”

For less daring, publicity-shy individuals, it could simply be a choice between a rock and a hard place. Ben from 100% Silk comments: “Clearly elements like site placement and the notoriety or lack thereof of the project pre-Indiegogo launch are factors, but mostly I see the process as fair, and infinitely more reasonable than the way films have been funded in the last century.”

It’s also possible to question whether using crowdfunding is a long-term solution. DFRNT said: “I would use the site again, although I don’t want to get in to the habit of just relying on it for funding. I think it would be lazy of me to just say “ah well, let’s do another funding campaign”. I think the ball is in my court now with regard to how I ensure that this isn’t just a one-off. I have to look at maximising the release and making sure that if there’s a return, then it goes towards funding the next release and so forth. Just being able to jump back to another IndieGoGo campaign is an easy way out, and people may get tired of contributing to products they don’t get immediately.”

However, crowdfunding is set to become even more credible as the model evolves. Earlier this year, My Major Company launched itself in the UK as the first online fan-funded label. Paul-Rene Albertini, an ex-Warner Brothers executive, began the label in France, in 2008. He does not simply see the model as a sleeker, streamlined recording company adapted for the web 2.0 generation.

He told Mashable: “There’s a new generation of artists out there, the DIY generation. I personally think that the new generation of artists is savvier than it has ever been in the past. They have access to all possible information and all sources of information through the web. They know how to position themselves out in the world.” The future continues to look bright for the most talented musicians, with a strong entrepreneurial streak. And it looks as though labels will eventually evolve to use other funding sources such as fans in order to reduce the traditional risks of offloading an unknown “product” on the market. It’s not romance, but at least there’s finance. It might be a Darwinian-artistic ritual, but the signs are that fans will continue to crave variety, diversity and that unquantifiable spark shown by artists such as Amanda Palmer and Ben Folds Five.

THE CROWDFUNDING HEAVY-HITTERS – A RUNDOWN

1. Kickstarter

Kickstarter brought crowdfunding into the mainstream. The site is currently only for creative ventures in the US, meaning it is still relatively small. Despite its limited outreach, it has scored some of the highest profile projects in the short history of internet-based crowdfunding. This year, Double Fine Productions succeeded in raising over $3 million dollars in funding for its adventure game within 24 hours of launching its campaign – marking the first single day in which the site has raised over a million dollars. Other multiple zero success stories have included inventor Casey Hopkins’ iPod dock and the Pebble E-Watch, which was famously turned down by several investors before raising over £10 million through its Kickstarter campaign.

Despite complaints about poor quality control, the site actually makes musicians and artists apply to use its platform. However, if they fail to meet their fundraising target, donations are returned to fans. This can be frustrating given the amount of work it takes to continue eliciting funds from strangers using the site. Critics of crowdfunding might approve of this Darwinian approach, as it means the best projects are more likely to stay the course.

2. IndieGoGo

IndieGoGo launched in 2008, making it the grand dame of crowdfunding sites. Its age is reflected by its scope – it’s active in 196 countries and accepts campaigns in every area, from sustainable lighting to budget films. Campaigners on here can still receive their donations even if they don’t get to their desired targets, which allows smaller, more quirky projects to thrive. One such project was ‘Suits for Wall Street’ which helped raise over $2,000 for Occupy protesters to buy ‘camouflage’ to disguise themselves on Wall Street. More conventional projects include the Satarii Star Accessory, a dock that allows mobile phone cameras to register an individual’s moves for filming. Artist DFRNT tells us: “The beauty of IndieGoGo over Kickstarter was that you didn’t need to reach your funding target in order to get the money that had been contributed – which allowed for a tiered approach – If I made some of my target I could scale the press down accordingly, so there was less risk.”

IndieGoGo received a $15 million funding injection earlier this year. Prior to this, its only outside funding had been a £1.5 million seed fund. Speaking to Forbes, founder Slava Rubin said that the success of the site was based on its empowerment of its users. He told the website: “The number one method for driving new customers is word of mouth. Successful campaigns lead to more campaigns. Also, we empower campaign owners with the share tools to reach out to their network. That in-turn excites funders to become campaign owners.”


3. Queremos

Queremos has enabled some of the most biggest and commercially successful indie bands such as LCD Soundsystem and Vampire Weekend to perform to audiences in South America. Acting as an on-demand system, fans can get bands over to perform by paying for tickets upfront. If the money meets the cost of promoters, the band and the technicians, the gig goes ahead. Fans only receive the tickets, rather than any further incentives. The musicians deal with the promoters, rather than the fans, so it doesn’t have the DIY element of the more traditional crowdfunding sites. It’s a way of offloading the risks of touring, when touring is also the main source of many bands’ incomes.

4. PledgeMusic

Solely dedicated to one artistic medium, this site’s biggest name so far has been Ben Folds Five. The trio raised just over three times their funding target, offering loyal (and wealthy) fans the chance to have framed and signed lyrics and their names written into songs. The general look of PledgeMusic is a little bit drier but it has a better interface for showcasing all of the projects which are on the site. There’s also a big emphasis on its professionalism, with its ‘About’ page announcing support and expertise from music industry stalwarts. It aims to distinguish itself from a fan-funding site by saying it wants to increase longevity of the artists – a fair enough distinction given the way that it doesn’t simply focus on one-off projects. Most significantly, it gives artists support from the beginning to the end of their venture to make sure they get the most out of their money – and that fans get a decent product.

5. Feed the Muse

Feed the Muse was created by MilkBoy, a Philadelphia-based studio which claims it was responding to changes in the music industry and the funding climate for independent artists. However, it decided to broaden its music brief after the site proved popular with creative ventures of all kinds, including theatrical outfits and “newly-weds”, according to the site. Fan rewards aren’t a critical part of the campaigns, with the site encouraging artists and musicians to “tap” into their existing social networks and traditional funding routes of friends and family using the site’s tools.

6. Rockethub

This is a more hands-on site co-funded by crowdfunding guru Brian Meece. The site not only hosts projects in every area, it also has what it describes as “launchpad” opportunities for its users. Successful projects which have hit their fundraising target are allowed to submit their venture for free, potentially getting the opportunity for publicity worth millions. Like PledgeIt, it aims to make the users of its site loyal by offering add-on services and opportunities to distinguish themselves from the other campaigners.

7. My Major Company

It deviates from its earlier French model by heading into traditional A & R territory. Fans select from 12 artists, chosen by the label, and decide who to invest in. The deal helps the artist develop their material, with fans reaping 40 per cent of their money back if the musician goes on to be successful.

8. Sellaband

Sellaband hit the news early on with its bankruptcy and later acquisition by German investors, in 2010. The site reportedly saw itself as primarily a fan-funded label, but was criticised for treating both its acts and its fan-funders poorly. Unlike the other crowdfunding services, it provides money for capital expenditure, such as equipment. The stakes are much higher, with bands expected to raise $50,000 and above to get backing. Public Enemy have been its highest profile user so far.

9. Crowdbands

Like My Major Company, Crowdbands was started up by record company executives recognising the need for a newer more democratic model. The site aims to launch up to ten unsigned acts a year, with the support of up to 30,000 members. It channels years of expertise into marketing and A&R in managing and developing bands, while giving fans the chance to help make creative decisions. However, one of the first bands on its roster is The Donnas who had major label success in the early 2000s. They also have experience of fan-funding after having two concerts financed by their fans, otherwise known as ‘Donnaholics’.

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3 Responses

  1. Excellent article, in-depth indeed! Many thanks. I’m curating it on Scoop.it if you don’t mind. http://www.scoop.it/t/peer-to-peer-lending

  2. […] BAMM In-Depth: Crowdfunding […]

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