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Fan-Funding in the Music Industry

Updated on September 20, 2011

Grabbing the concept of The Digital Age

More and more fundraising websites aimed at revolutionizing the music industry have been popping up recently, some of which have had one or two successes and have drawn in a profit for investors, with these investors usually being fans who have helped to finance an album.

These business models are ultimately helping to shift the music industry on to a new digital age and to boost the online economy in the music retail sector and it is true than fan-financing has a major future in the evolution of the music industry. However, as already discovered fan-funding alone is not enough to financially support such a music business and generally investors seem to be overestimating the digital download market by a huge extent.

For music businesses it looks like consumer filtering and analytics are the way forward and for investors a small success is nice but the fact remains that even only one artist in every twenty that gets signed to a record comany ever manages to recoup their advances and just costs the company money and these statistics should be kept in mind whatever the business model.

The problem is that fans and investors are looking for financial returns, they are looking for a return on their invesments and whilst this is certainly possible, though unlikely in most cases, they are still not quite grabbing on to the whole concept of fan-funding itself with most of them looking at it from a Dragon's Den style business angle. Despite the fact that consumers are either given a download of an artist's album or even the album on CD in return for their payment they still see the music as being free and expect the entire cost of that album to be recouped in the return on their investments plus a bit of profit on top. For businesses the fan-funding concept is not about ensuring consumers can make a profit from music, albeit giving them a very small chance to do so, it's about turning the tables and letting the consumer choose what they want - before it's produced. It's about ensuring that the music they produce has already been paid for by the fans and investors, it's already sold enough copies to investors to cover the cost of production so as soon as it hits the retail sector the first sale makes a profit for both the company and the artist. It takes the risk out of financing music while giving fans what they have already willfully paid for, the cost of production has collectively been shifted onto them.

If not enough fans invest in (or pre-order) the album then it simply doesn't get made, there's not enough demand for it and it's unlikely it will sell. The ideology is 'tell us what you want, pay for it up-front and we'll give it to you, if not you don't get anything'.

Fan-funding in the music industry doesn't just eliminate most of the risk for record labels and similar business models, it's also a fantastic way to prevent filesharing and copyright infringement. If enough people want an album by a certain band and there's enough demand then they get it by helping to fund it, they've paid the cost for it and therefore are not likely to go looking for it on filesharing networks. If there's not enough demand for the album then it doesn't get financed and doesn't get made therefore it's not going to be available on filesharing networks anyway.

Fan-funding and filtering and analytics combined with streaming and subscription services are the way forward for the music industry and it can only happen digitally. For an example of a musician who is taking advantage of the digital revolution then why not take a look at Ryan Inglis.

Related Hubs:

Best New Music: Ryan Inglis

How The Music Industry Is Changing

Making Money And Music Online


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