Music and Crowdfunding: Can New Bands Get Off the Ground Using Crowdfunding?

Posted by | Dec. 12, 2013 | 3,367 views

Camille McClane is a freelance tech author who specializes in the study of how social media and internet marketing have revolutionized global 21st-century business models. Camille has taken particular interest in crowdfunding and its viability as a source for securing funds for almost anything these days. She hopes you enjoy this article and will be better equipped to start your very own crowdfunding campaign!

In case you haven’t noticed, the music industry has changed drastically, and nobody has felt this upheaval more than you: the talent. In the old days, once you climbed the mountain (you know, putting together a band and songs) and finally got in the same room with an agent who liked your stuff, then the rest was smooth sailing. All you needed was talent (and, well, luck and connections). Now even this truism has changed, and the mountain becomes ever higher. How many talented people do we know that have got their ducks all in a row, written, recorded and produced a fantastic EP, played it live, built a following, and sat down with an agent to be told, ‘well, if you can come up with 10, 20, 30,000 thousand we can launch you properly.’

There is one silver lining: new paths up the mountain have been opened up in the upheaval. If you look around the landscape of new bands and new players, you’ll notice that it is the entrepreneurial bands–those that not only persevere, but take advantage of new technologies and new media to connect with potential listeners–that stand a greater chance of making it.

Enter crowdfunding:
Whether it’s Indiegogo, Crowdfunder.com (popular with small businesses) or a myriad other options, crowdfunding has become a saving grace for musicians running out of options. Utilizing social media channels already developed, one can quickly advertise a new song, recording or event and galvanize this network. The supporters directly enable and contribute to the band’s work, reemphasizing the importance of a fanbase.

Here’s how they work:
Kickstarter, another option, offers a simple all-or-nothing approach, in that the entity seeking donations posts a target amount desired. If the target goal is accomplished, Kickstarter takes a 5% cut. If not reached, all the money is returned to the originating donors. The site seems the most robust channel for getting a project successfully funded; of 24,951 Music projects, 13,379 have been successfully funded. 574 of these have raised at least $20,000, including the $1.1 million raised by Amanda Palmer of the Dresden Dolls.

Indiegogo presents the most interesting option, as they offer one of the most popular alternatives to an ‘all-or-nothing’ approach. Their flex-funding method takes 9% if the goal isn’t met, but the entity seeking the funds keeps everything pledged – the Indiegogo cut drops to 4% if the goal is met. The understandably loftier targets skew the success rate to less than that of Kickstarter’s, but Indiegogo does not make the statistics publicly available for easy comparison.

Rabbl comes across as the interesting new way to crowdfund. Bands no longer have to eat the cost for gambling on specific venues and where to tour. Essentially, it allows a band to feel out the interest for a specific venue and date without committing. Instead of a specific total amount donated, the goal would be selling so many tickets at a reduced rate to ensure a profitable night for all involved parties. The site’s social media proclivities, namely that of a profile page accompanying any projects the band enacts, enable for much more than a research tool. Other bands, local to the proposed area or just crossing paths at the right time, can latch on to projects to support the band – lending their name and fanbase by offering to play an opening slot for example.

Crowdfunding has changed:
All the way from the top, President Obama has transformed the way crowdfunding works. Due to Title II of the Jumpstart Our Business Startups (JOBS) Act, restrictions on investment opportunities have been lifted. Rather than opportunities for individuals, films can now be financed utilizing “equity crowdfunding.” This means, basically, that whereas before you were only able to offer perks to supporters of your crowdfunding campaign, now you can actually offer equity, ie, profit. So, rather than telling fans that you’ll give them an autographed t-shirt if they pledge $100 to your campaign, now you can actually exchange 1% of your profits from the album in return for an investment of $100. You become a business, and your fans become investors.

The details are a bit more complex: basically, Title II defines applicable investors as individuals or married couples with an annual income of $200,000 for those who are single and $300,000 if married (basically, your parents and your trustafarian friends). This amounts to 9 million Americans who qualify under this standard, opening up a new source of largely untapped potential. The excitement of getting new music aside, the investment opportunities are equally abundant.

It’s not just them, however. Title III of the JOBS Act lets smaller players in on the action. With a cap of $1 million, a musician can accept up to 10% of the annual income of a 6-figure earner and up to 5% of an individual who earns less. Which means that, your friend waiting tables at Jerry’s can invest $500 of his hard-earned $10,000 annual salary in you! Not just because he thinks you’re awesome, but also because if you make it, then his annual salary just went up!

Crowdfunding projects are still work:
Attempt to sell enough tickets on Rabbl to a popular venue, leak one song off the proposed project to be funded, tout the biographical credits of the big names the band is looking to work with on the next recording: however an act makes his followers, fans and potential business partners understand the focus and effort that will go into the project. In other words, effort goes not only into being a musician, but into succeeding as a musician. Excitement and fanfare over popular projects are helpful, but there’s an underlying reason known commodities earn the trust of investors: it’s called a return on investment.

This is where these sites can help the lesser to the complete unknowns. A successful campaign is a voucher for one’s trustworthiness. These sites don’t fill in the entire budget for tours or albums, they typically get the band to the next step in the long process that is carving out a career in music. After all, raising enough money can attract a big enough producer to attach his or her name to your project or a label to reconsider terms of a contract. Then, the campaign starts anew, with a much more robust target, a brand new outlook and the attention of a new pre-established fanbase – if not a more traditional financier outright. Typically, the band can even take advantage of those eager to be a part and help turn a profit from simple things like old instruments, setlists and other memorabilia to be trashed otherwise.

All these avenues and opportunities open up the band to more exposure and more potential for a critical mass to fund specific projects. The band’s entire profitability derives from developing enough fans to maximize the earnings potential when going on tour. The more fans, the more interest, the more the band allows itself to do. Crowdfunding reinforces the ideal by sharing that responsibility with its fans, the ultimate stewards of a band’s future, to a much more critical extent. Can you make a song that taps into the collective conscious of a moment? Can you book that holiday show to finally break out of the bar circuit? Can you connect with your fans to the point they are ready and willing to put their money where your mouth is?

In the end, you’re still climbing a mountain. However, the opening up of funding avenues means that you can now enlist a hundred (or a thousand, or a million) of your closest friends to help you make the climb. Good luck!

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Posted by on Dec 12 2013. Filed under featured. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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