Crowdfunding in the Music Industry
Chloe Martinelli (n9162739)
New media is a modern form of communication that is changing the way information can be passed between societies around the world. It is rapidly changing many industries worldwide with the introduction of alternative methods for once very traditional procedures (Bannerman. 2013, 10). Crowdfunding is a growing aspect of new media that is dramatically altering the way more and more things are getting done. The music industry in particular is being transformed in a huge way from the introduction of crowdfunding sites such as ‘PledgeMusic’ and ‘Kickstarter’. These sites are allowing more and more artists to produce and promote their music much more easily than if they were to use traditional channels, especially with the help of social media platforms. The cost associated with conventional methods means that there is limited access for those who cannot afford it so the emergence of these sites are making for a more diverse music industry.
How the Music Industry Works
Producing an album is a costly affair for independent musicians who have to pay for recording, distribution and promotion themselves if they are not signed by a record label. For an independent musician to release an album the average cost is roughly $10, 000 according to Colletti (2013). Colletti (2013) makes it clear that it definitely is possible to produce an album for cheaper but it will require a lot more work and planning. While some artists have to cover all the costs themselves, others are lucky enough to get signed with record labels that help with it. The benefits of having a recording contract is that the record label will pay huge amounts of money to sell the records but according to Masnick (2010) it’s not as good as it sounds. Whilst the band may have more support from a record label than if they were to work independently they have to sacrifice copyright to their music as well large percentages of the royalties (Masnick. 2010).
This is where crowdfunding enters the picture. Crowdfunding allows musicians to raise the funds to produce their music independently without breaking their bank accounts and the best part is they still have 100% ownership of their work (Kickstarter. 2015).
So What is Crowdfunding?
Crowdfunding is a way for entrepreneurs or artists to raise money for a project by putting out an open call on the internet. The differentiating feature of crowdfunding compared to regular donations, is that the people who provide funds for the projects are offered rewards for their donations (Belleflamme, Lambert and Schweinbacher. 2014). According to Belleflamme, Lambert and Schweinbacher (2014) there are two different ways to crowdfund; one is to offer goods up for a pre-sale in order to raise funds and the other allows the fund providers a profit share once the project has succeeded. Websites like ‘Kickstarter’ use the former type primarily allowing their users to offer their funders different items for sale or specific rewards depending on the amount of the donation, typically these are exclusive goods that won’t be available to the general public (Kickstarter. 2015).
With the introduction of crowdfunding websites, such as ‘Kickstarter’ and ‘PledgeMusic’, independent musicians have been able to set up accounts that allow them to present a project and a funding goal to the public. If people like the artist’s project they can pledge money to receive exclusive rewards from the musician once the project has been completed (PledgeMusic. 2015). This new technology is changing the game for independent musicians around the world who are now able to produce work that otherwise would have been impossible. According to the Kickstarter Statistics page there have been 19, 550 successfully funded music projects, with over $143 million raised, making music projects the most successfully funded category on the site (Kickstarter. 2015).
The beauty of this type of set up is that it creates an environment where the consumers are able to feel like they are involved with production process. By giving consumers control over certain aspects of the media is an important part of crowdfunding and results in “a more democratic society” (Fuchs. 2013). By giving the consumers this control crowdfunding websites are taking power away from big businesses, or in this case big record labels, and giving it to the general public. This creates an active audience, “who doesn’t want to just sit there but to take part, debate, create, communicate, share” (Rosen. 2006). According to Bannerman (2013, 18) this concept leads to greater democratisation in funding by removing the elite layer and creating more of a classless system. This idea focusses on the philosophy of “the best person to do something is the person that most wants to do it” (Bannerman. 2013, 18).
While it may seem that crowdfunding is a ground breaking new idea that solves the problems of all underfunded musicians, there are still some reservations people have. What happens if the project doesn’t raise enough money and the people are not able to provide the rewards? Fortunately for the backers many crowdfunding websites have rules put in place to help with this. With most websites if a project does not reach its goal then all the money will be refunded to the backers and the project will be deemed unsuccessful (PledgeMusic. 2015) but sometimes even with all the money funded to get these projects up and running sometimes it just isn’t enough. ‘Reddit’ user CopiedTm (2013) provides a list of funded but unsuccessful projects that failed to deliver their promised rewards. Fortunately in comparison to the number of successful projects this list is very short. However, while there is most often a safety net for the backers of unsuccessful projects, there isn’t any support provided for the unsuccessful artists who have put time and effort into their campaigns. According to Bannerman (2013, 10) there is a huge risk of exploitation for artists relying on crowdfunding for their funds when they don’t get paid up front. Bannerman (2013, 13) also suggests that a major risk of crowdfunding is that it disconnects artists from “stable and predictable pools of funding and professional resources”.
Crowdfunding and Social Media
When paired with social media sites such as ‘Facebook’ or ‘Youtube’ crowdfunding can have an even higher chance of success. ‘Kickstarter has a social media friendly set up that allows people to share their projects via various social media platforms to boost their signal (Kickstarter. 2015). According to Apps Blogger the higher the number of Facebook friends the project is shared with the higher its chances of success are. There are also many examples of people promoting their projects on ‘Youtube’ to reach a wider audience thus increasing their success. One particularly good example of this is Bochan, a Cambodian/American singer, who wanted to release her new album ‘Hello Hi’ and a video clip. Bochan set up her Kickstarter campaign with a goal of $10, 650. She offered rewards ranging from a personalised postcard for $5 backers all the way up to playing a private event for $5000 backers (Kickstarter. 2015). With the help of the video she released on ‘Youtube’ she was able to not only reach her goal, but to surpass it by almost $4000.
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The use of social media to publicise projects is vital to the project’s success, according to Hui, Greenberg and Gerber (2014) “The majority of failed project creators cited the inability to successfully leverage an online audience as a main reason for failing”. Promoting projects on social media can be done in many ways ranging from sharing it on platforms such as ‘Facebook’ and ‘Twitter’ and getting friends and family to share it as well to posting about it in niche communities such as ‘Subreddits’ (Hui, Greenberg and Gerber. 2014). As Colletti (2013) states successful projects come from artists having large social networks and lots of videos.
Conclusion
Overall crowdfunding works well to help independent musicians fund their projects. Despite the risk of exploitation there is evidence to suggest that crowdfunding works to create a much more democratic environment in the music industry and allowing more and more artists to establish themselves. With the additional help from social media platforms crowdfunding sites are successfully funding music projects every day that would not have been able to be completed using traditional methods of funding.
References
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Belleflamme, P., Lambert, T. and Schwienbacher, A. (2014). Crowdfunding: Tapping the right crowd. Journal of Business Venturing, [online] 29(5), pp.585-609. Available at: http://www.sciencedirect.com/science/article/pii/S0883902613000694 [Accessed 14 Apr. 2015].
Colletti, J. (2013). How Long Is This Gonna Take? The Time and Cost of Recording a Full-Length Album. [online] Trust Me I'm a Scientist. Available at: http://www.trustmeimascientist.com/2013/05/06/how-long-is-this-gonna-take-recording-an-album-in-the-21st-century/ [Accessed 16 Apr. 2015].
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