Music Stock – Investing In Artists
In the old days of the record industry, major labels made a loss on 90% of the artists that they signed. Even to the most fiscally obtuse observer, this was clearly an inefficient model, and now that music distribution is either free or extensively affordable, this approach has become non-viable. Thankfully, a new business model has emerged that promises to remove this investment risk – get the fans to pay for the record before it has even been recorded…
Music Sharing Becomes Music Shares
The basic idea is that fans can buy a ‘share’ in an artist’s album, and when enough shares have been bought, the fund is invested in having the album professionally recorded, produced and distributed. Shareholders then get a copy of the album, and if the artist becomes popular and the album sells well, they can even make a profit on their investment.
These sites provide a forum for generating fans, as well as leveraging existing ones – at Slice The Pie, all submitted songs are subjected to blind reviews by a pool of reviewers, with the top 2% of artists being put forward to the showcase stage.
Taking Stock Of The Music Market
These ‘music stock’ models are not currently available in the USA due to stricter laws regarding gambling and unregulated stock markets. Slice the Pie is based in the UK and is approved by the Gambling Commission, and Sellaband has similar authorisation in the Netherlands.
However, it is likely that legislative changes will be made to enable such sites stateside also – Amazon are very interested in getting onboard, and Amazon UK have already created a section for Sellaband CDs.
Putting The Music Up Front
The idea is intriguing, and represents a very low-risk solution to music monetisation for all involved. For labels, they can easily identify which bands have an actual paying fanbase (rather than the mystical and often artificial play count index of sites like MySpace), and use this to gauge whether they should invest in an artist.
For artists, it provides an opportunity to generate new fans, or a motivation for existing fans to get involved in a fundamental way with the development of the band.
Finally, for listeners and fans, it provides an opportunity to decide for themselves which acts they want to be successful – and they can even make a profit from getting onboard with a great artist from the beginning.
In theory, it just might work – if it can get enough momentum to reach that ‘critical mass’ required for mass adoption. This is another space to watch with interest…