Guest Post: Why The Band As A Startup Model Doesn't Make Sense - hypebot

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Wil

Startups selling 'hope and potential' really isn't true anymore. If you've seen shows like 'Dragon's Den', or startup blogs you will see that VCs want to see a proven track record. So just like startups, musicians should work to build their own following (email list is good), sell some cds, gigs and other things (subscriptions, merchandise, etc).

Then they are not only much more attractive to 'investors', but have more power and control during the negotiation phase.

Tom

I'm no huge fan of Little Boots but actually she's a good example of someone who DID do a lot of web-based fanbase building, image building, audience building, giving exclusive material away free, all that music 2.0 jazz.

Unless there's something inherently rotten about "electro-fronted ladypop" of course.

Sean K

I agree with what your saying and that the music industry has such flaws that fans have to search for new music that isn't corporately assembled. I live in Austin, TX and am blessed to be emerged in a constant flow of music. Yet, it is still a search for newness. Definitely a love-hate relationship though. Always feel like I'm missing out on so much.

hg

Artists taking on investors and behaving as start-ups is a very, very slippery slope I, as an artist, would not want to be involved with.

Having been involved with start-ups and bands, there are too many opened ended issues that concern me. What happens when the band doesn't perform/generate the ROI the investors want? In the start up world, you have layoffs, fire-sales, and dissolution of companies, but how would this work for an artist?

If artist x takes on $50k in 2009, with the expectation that s/he will generate $500k by 2015, and under performs, then what? Do the investors force the artist to sell the music and merch rights to a bigger company; do they fire the artist and hire a new one? Subsequently, how much control would the investors have over the art? Could they refuse to let the artist release a song?

What happens if they pull out and write-off their loss, and in 2020, the artist finally breaks through, and sells out MSG and headlines Glastonbury? Should the original investors be entitled to some compensation? I don't know, the whole thing seems a little off.


I suppose I can see this model work in situations such as the Jonas Bros., or Miley Cyrus, essentially acts created by a company (Disney, Nickleodeon, etc.) acting as an investor, but for the 99% of musicians who are not prefab entertainers, I don't see this being a good idea.

Ace Thomas

Pardon my ignorance, but can someone clarify this excerpt:

"This is problematic because the media is not that interested in bands or websites/tech which aren't brand new... or massively successful."


I do not quite follow the logic here. Wouldn't the media have MORE of a vested interest in bands with an already established fan base?

Sean

You'd think so but pick up most magazines, music and those which include some music coverage, and there's a huge (disproportionate) hole between the established acts and the pages of new bands coverage. That's what I was touching upon but I did just write this a as a blog, rather than a considered piece.

Adam Wexler

I personally have been preaching a artist/band ~ startup correlation for quite some time...but on a bit of a different level.

I think it would be great to have music business veterans like Terry McBride & Brian Message on your "Board of Directors." Because they'll be running the fund, they shouldn't have enough time to be overly involved, but they would be a great resource to help build or reconstruct the "team" if it wasn't already in place. The manager(s), booking agents, etc. could also be viewed at the "Advisory Board" if the core team consisted of the band members.

In general, as a digital music startup entrepreneur (www.gorankem.com) & band manager (www.theminorkings.com), I think the premise has a lot of merit, and I would love to discuss with others off this forum.

-Adam Wexler

Beni

From my perspective, more than anything else , what disgraced the old business model of the majors, was the need that record companies have, since they became part of big corporations , to maximize earnings in the short-term.

My last experience managing an upcoming artist signed to a major was ten years ago. In this case I found myself in the surreal position of asking the record company to cut the release budget of the artist I represented.

I understood that it would be wasteful to make a big initial push ,the artist in question being really innovative and not fitting in any of the radio formats of the land. In my naivete , I thought that the label could use this money in a more sensible manner supporting the artist through the first year of the release, time that I thought sufficient to breakthrough the artist through the buzz generated by touring.

The problem was that time was no longer something record companies could afford. The artist and record company merrily agreed that they would go for the big push, I jumped ship, and three months later the record was dead , six months later the band folded.

This little episode I think explains why I agree with Sean, that more than a new source of financial funding,what artists really need is the benefit of a long-term view.

Ace Thomas

But I don't understand the logic here, what benefit would a magazine reek from being "unconventional?" Is this simply to appear more authentic to it's readers/fans?

I guess I am just trying to understand how this translates into profit.

Matt

We've been covering this "band as a start up" idea for a while on our website - Volume 11, and will have a further article about this posted soon.

http://www.volume11.us/2009/02/25/an-investor-approach-to-music-labels-revisited/

Yes, the return on bands may not be great. Someone would have to invest for personal/altruistic reasons just as much if not more than for financial reasons. But in the world of art this shouldn't be too much of a surprise.

VCs and others invest in companies because of the high risk/high reward potential, and therefore people designate some funds to take these risks. The problem from an investor perspective is - where is the high reward? It seems like one would do just as well to play the lottery than pick a band to invest in and get a very big payoff.

In the end a model that may work is for new labels to develop quasi-investment models where they have percentage ownerships in everything for multiple bands and can scale their own management time and expenses.

Matt

Curious to hear more about the Go Rank 'Em concept...

Ryan Hayen

This was the same initial reaction I had as well. Aside from that, I wonder where exactly these VCs would come from. The Terry McBride venture sounds somewhat interesting, but I just don't see outside investors lining up to give baby bands or even somewhat established acts cash. If this model is based off of raising funds from investors who exist outside of the music business, it just wouldn't make business sense in their perspective.

Tony

Just read the recent comments of indie label-owner Greg Ipp. I was shocked to learn that, since 2005, Metric (Last Gang/Universal) has received $377,207 in Canadian grant funding.

Ipp points out: "DIY is not DIY when you've received $300,000 in public funding. Independence has always meant a disassociation from the majors; that is not the case here. What you are seeing is an example (there are many) of skilled market positioning."

Patsy R

Surely the point about Metric is they are putting the money from revenue in their pockets, rather than having to wait a year to see that a record label's taken all their money.

Then again, this article is so badly written and unintelligible that I may have totally missed the point.

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