Indie-nation ... The Advent of Crowd Funding

The modern Internet age has made it easier ... and harder .. for independent musicians to make a living at their craft, but perhaps this is where 'crowd funding' can help.

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Kathryn Ballard Shut

TIMKAT Entertainment's Dream On a T-Shirt: Music IS My Day Job

An interesting phenomenon has arisen in the independent artist space lately in which labels, bands, and music marketers can make a case for the public to "crowd fund" them in an effort to create more music and merchandise in the near future. Sites such as CrowdFunding.com and Kickstarter.com have literally found a new niche in this area and are profiting from the trend.

In a similar vein as public radio and television, crowd funding usually asks a label or band to set a reasonable goal and make a tangible business case for fund raising. For example, I recently supported a fellow independent R&B/Soul label that had the direct goal of raising enough funds to produce three new albums within the next two years. While I was happy to see that the label reached its goal through its fairly extensive fan base, I also questioned what was happening in the music business that thus far has forced otherwise great music labels to go begging for funds. After all, isn’t that what the actual sale of albums and merchandise is supposed to do – earn income so that labels and artists can make more music in the future?

Sadly, as the emergence of crowd funding projects suggests, marketing music in the Internet Age is simply not that easy. As a jazz and soul label, allow me to explain some observations behind why, while music is certainly easier to produce and distribute, it is not as easy to market and eventually sell, and therefore why crowd funding is quickly catching on.

First of all, consider the rise of the independent artist over the past ten years. In the early 2000s, unless one was lucky enough to have won American Idol or had an independent sponsor with deep pockets, by and large, most artists still needed heavy backing, artist and repertoire scouting (A&R), and allocated funds provided by major labels. These were the Good Old Days for major labels, as they could control music, artists, trends, and releases, in any major market area that they wished.

However, with the advent of the iPod, mp3 files, and music sharing sites such as Napster, MySpace, and iTunes, the market area and playing field completely changed from favorite local band to possible global overnight sensation. Suddenly, independent artists no longer needed a major backer and could place their music all over the Internet to people and possibly other labels to hear. YouTube created a sensation several years ago and launched the career of Justin Bieber. Katy Perry did a great marketing campaign on MySpace in 2007. A certain student-turned-faculty member from Berklee School of Music, Esperanza Spalding, started selling out jazz concerts across the country due to amazing word-of-mouth on Facebook and Twitter and beat Bieber in the 2008 Grammies for Best New Artist. And finally, a British lass with a huge voice, Adele, swept the same Grammies in 2011, who was also an independent artist when discovered. These success stories showed musicians worldwide that the Dream Was Possible Without a Major Label and therefore the global quest to the top was on.

Therein lay the rub of independent artistry. If it were possible for one musician to “break out”, therefore wouldn't it be possible for everyone to “break out”? We’ve learned that while there should be enough room for everyone to make and sell music in a variety of genres, there is only so much consumer money to go around, especially in tough economic times. Major labels discovered that this was true as well; not only were they now competing with other major labels as before, they also had to compete with the surge of world-class and world-wide, independent talent. The difference is that the major labels comparatively still have much larger sums of money at their disposal than the indies, and the battle has ensued ever since.

That brings us to the second challenge of being an independent artist in the Age of the Internet: distribution. Think back again to the Good Old Days (if they really existed for anyone but the labels!) If you wanted to buy music, you headed to a record store (independent or chain, it didn’t matter) to buy the latest sound heard on the radio. Even as little as 5 years ago, there was no Spotify and iTunes was just beginning to make its indelible mark. People were not listening to music as heavily on their smartphones as they do today, and therefore streaming services were not necessary or accessible.

However, today, partly due to the success of the iPod and smartphone, such services are prolific, leading to another good/bad scenario for independent artists. Streaming services such as Spotify, Google Play, and Amazon mp3 are fantastic for building a fan base relatively quickly and globally; however, at performance payout on Spotify of less than $0.0013 per played song, an artist would have to stream one song over 700 times to make one U.S. dollar. He or she basically already has to BE famous to stream enough music to make famous money, thereby defeating the allure of a streaming service to showcase new talent.

Finally, there are inherent up-front costs with sales and marketing an album that continue to keep some musicians in the red. On the old business model, still used by major label and many independent ones, music is a lot like the movie industry and often without the big payout. Labels often sink costs into the production without any guarantee of a financial return for the gamble, namely in costs for the studio, producer, musicians, album art, CD pressing, CD packaging, shipping, shooting the video, and final distribution of the CD, not to mention ongoing marketing costs and time spent shaking hands, writing letters, posting music, posting blogs/Tweets/Facebook status, and begging any radio network to play their music. Such artists could spend easily $500 to over $5,000 in up-front production costs to make the music, only to find that while people love the sound, they don’t always want to pay for it -- and why should they, when they already pay a tiny subscription fee to a streaming service and therefore have the entire world's music at their fingertips any time they want? The same blessing of convenience that introduces an independent artist's music to the world has also ultimately become its curse as well.

That simple truth brings us back to why crowd funding is growing in popularity. Because amazingly, modern Internet sociology dictates that apparently people will drop a dollar into a hat for the hope of a future music project before they will shell out $10 to download a finished album or part with $12 to buy it on CD. If consumers see a donation as “charity”, they appear to be OK with it; however, if it appears that an artist is marketing, many run away and call it spam.

Ultimately, the advent of crowd funding changes the model that previously demanded that labels and artists pay for production costs up front. Instead, artists are finding that if they can ask for sponsors prior to production, any music and album sales down the road will be extra profit and a super sweet icing on the cake.

Best always,
Kathryn Ballard Shut /shoot/
President
TIMKAT Entertainment
Denver, CO, USA
Web: http://www.timkatent.net
Twitter: @timkatent

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Kathryn Ballard Shut