The Artist As A Startup & Label As A Venture Fund

Money in hand

Is A New Model Emerging?

During the panel that I was a part of at yesterday's New Music Seminar,  we  briefly floated the idea of the artist as a start-up company.  Not only is there value in thinking of an artist's career (or any career for that matter) as a business and embracing an entrepreneurial spirit, but perhaps artist and record funding should become more start-up like as well.

Instead of the old label model where a large advance is given at the start of the relationship in exchange for the majority of any future profits, funding could come in waves as it does in Silicon Valley. Early stage or seed funding to launch is followed by a successive series of rounds for expansion based on performance and a company's (or artist's) current valuation.  Along the way, the founders/artists  work to hold on to as large a percentage of ownership as they can.

It's not a perfect analogy, but it seems to be a useful one as  the music industry continues to search for new ways to fund successful music projects. And there are signs that some are already embracing similar models.

Radiohead manager Brian Message, Nettwork's Terry McBride and the UK's MAMA Group are launching  a venture like music funding source dubbed Polyphonic. They have $20 million to invest a few hundred thousand dollars at a time on new artists not signed to record deals. According to the New York Times,  the company will then guide musicians and their business manager (who will function something a CEO) to outsourced providers like Topspin and Tunecore.

Former ArtistDirect founder Marc Geiger is planning a similar service at booking agency William Morris Endeavor. Details are slim, but "Self Serve" would reportedly provide tools and financing for artists to create businesses independent of the major recording labels.

The band Metric, whose ultra-sharp manager Matt Drouin was also a part of the panel  hosted by Topspin's Ian Rogers that I was on at The New Music Seminar, self-funded their own release with the help of a Canadian government grant. Like most smart start-ups, Metric outsourced almost of the functions of their multi-faceted global campaign which has already old-sold it's precious label sponsored efforts.

But maintaining control of your destiny and more of your future profits is not easy. "When I get up at 6 a.m. the British are e-mailing me. When I go to bed at 2 in the morning the Australians are e-mailing me. It’s an extremely empowering position, but one hell of an undertaking,”  admits Drouin.

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  1. Been pondering this bands as start-ups concept too but I have a huge problem with it. Been curious about the reactions to the NYT piece, especially as I was the guy who released Metric’s previous record ‘Live it Out’ in the UK. They’re an interesting example which kinda breaks this bands as a start-up.
    My main issue is that start-ups and hyped new bands, both work on the premise of hope and potential, whereas any tried and tested company or band, has a quantifiable return on investment. This is problematic because the media is not that interested in bands or vaguely established websites/tech which aren’t brand new (as Metric weren’t when we released their record, despite outselling the Gossip week on week until the NME cool list, etc) or massively successful. It’s always a headscratcher when a band changes their name (like the Kaiser Chiefs did) or a website relaunches as something totally different, that it leads to press, which leads to other media coverage.
    The economics (and perhaps ego-nomics) is all sorts of illogical when things are run on and driven by promise (see also: the banking crisis). All sense of scale is totally lost when people invest or talk about future projects, which is obviously what makes the world go around but at the cost of everything great that falls in the huge canyon between the stools of the new and the established. It’s incredibly easy to miss a window of opportunity or jump the shark too early (often leading the charge for a lesser copyist), whilst for some reason never being allowed a chance to shine.
    Metric’s continued success is in part down to consolidating all the great things they’ve done in the past and the fact they’ve made a great record, during a window of time when there aren’t a great deal of great records and less and less brand new major label bands. Yet, the fact that their album was overlooked in the UK in favour of the likes of La Roux and Little Boots (who was once in a band named after a Metric track) or U2 and Oasis speaks volumes about the state of the media and its problems which are more at the stagnant heart of the poor sales of records, much more than p2p.
    Metric may have done better with this record but it’s far from the best case scenario, they’re still playing similar sized shows (billed exactly the same place on the Reading bill) but slowly starting to get a few mainstream breaks which might help them crossover in the states.

  2. This concept probably works best when getting money from those who already have music business than from those who don’t.
    The ones who know music will understand the risks involved. Those outside the industry may not find it very appealing to be told that there is a good chance they won’t see any return on investment.
    I have put together band business plans, and I always start with, “What are we selling and who are we selling it to?”
    A band that has already established a fan base and already has several years’ worth of sales and income data can use that to make some reasonable future income projections.
    A band that has no track record can’t point to past earnings to show there is a market. Therefore anyone who invests in the band is taking a leap of faith. An industry person who has had success launching other bands can perhaps predict how this new band will do, but still without knowing for a fact fans are willing to pay for something, it’s still risky.

  3. I’ve been talking about this subject on my blog for months. I definitely think that major labels should kind of “fall back” to the position of being banks and provide ‘start up capital’ for independent artists with successful track records.
    It’s when these majors try to take too much of an active hand in the industry that things get screwed up.

  4. This concept will likely help encourage sustainable artist careers and development. Much like that of a small startup who receives funding in waves – they have to make the most from the funding of each wave of investments and be efficient in their actions. Looking forward to see what develops.

  5. It just occurred to me that a band could use TuneCore to put their music into the market as “proof of concept,” in order to secure future investment. It’s tricky, of course, since you want things like hype and “first release” and sometimes exclusivity, etc., which could have their focus diffused if the music’s already up.
    Still, nothing like going to an investor and saying, “Hey, I already sold X units, and that’s without backing, imagine what I could do with some capital!”
    Great being on the panel with you, Bruce!

  6. Regardless of how artist get funding, the bottom line is there will never be enough funding for more than 10-20% of all the great artist in music.
    So, we come back to the basics: Daily dedicated efforts that advance your career and build your fan base. If you truly want to be independent, this is the best approach to undertake.

  7. With honest work – both artist and label – anything is possible. The key is to keep the overhead low, objectives obtainable, and the songs- great – It’s about fundamentals- passing, teamwork and lots of checked off “to-do” lists. HappyParts is slowly proving the above model- it takes years to develop a great label + luck + a perfect viral storm. I juggle 3 jobs to do this. And I am loving everyone minute of it. CS.

  8. …once again…make music/musician…..distribute music/distributor…..promote music/promoter…..sell music/salesperson….finance operation/financier. All of these functions/people are human beings who wake up every morning and try to do the best they can with what they have. Everyone of these “people” can/have sat in as the “record company.” I guess the point to this rant is that an awful lot of time if being spent wondering what to call the person/entity that makes, markets and sells music. Personally, who gives a shit. Find out what role you want to perform in the scheme of things and find other people to complement your unique skill set and go ahead and make/find some music that you like and find other people who like it as well. Price it so it is affordable and sell it to them…they will be grateful for your efforts. What do you call this? The business of music. Stop spending so much time trying to analyze how it used to be, how it is and where it’s all going. Be here now…I know I’ve heard that somewhere before. Get on with it already. Now I’m going to have my first cup of coffee.

  9. “…once again…make music/musician…..distribute music/distributor…..promote music/promoter…..sell music/salesperson….finance operation/financier.”
    music/musician/engineer = me
    music/distributor = wheatus.com
    music/promoter = twitter, facebook, e-mail
    music/salesperson = the music and word of mouth
    finance/operation/financier = paypal
    Old people….don’t change a thing you are perfect.

  10. if this type of venture takes off, i wonder if outsourcing would grow costlier or even, dare i say, take a stake in the artist compositions/recordings which hearken back to the traditional ways? i hope not!

  11. Metric may best exemplify the crazy funding system that supports the mainstream recording industry in Canada. Since 2005, Metric (Last Gang/Universal) has received $377,207 in Canadian grant funding.

  12. The idea of looking at artists and bands as start ups is not new at all. It is a growing perspective for years. Due to the surge in possibilities in (cheap/free) online promotion and distribution the start up of your own company is a clear and logical approach. Nevertheless, entering the music market still remains difficult and the entrepeneurial attitude doesn’t come naturally for most artists. We @MOvE work from the Netherlands and we already working with funding from goverments, private investers and….ofcourse fans (!), to start up music companies. This means not only provide them with tools, services and so on, but also coaching/managing them towards a sound business. In our experience you have many pitfalls and need a carefull and tailor made solution for every individual band/artist. The use of a valuable network, creative marketing and promotion solutions should be combined with will of any artist to work on his/her business on a daily basis.
    It all takes time….

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