With traditional methods of merchandise distribution going the way of the dinosaur, it can be challenging for an indie band to get their products out to the people who want them most. Unless you know someone at one of the big distro sites, you’re stuck selling shirts and CDs out of the back of your van. Thankfully for those of us without connections, Limited Run offers a more direct way to get your music and merchandise to fans who otherwise wouldn’t have access.
Limited Run allows musicians to set up their own online shops. These shops carry anything from digital or physical copies of albums to shirts to stickers. Setting up a site on their platform takes little time and lets you get your products out sooner rather than later. On top of that, they offer Sound Cloud integration, which lets you stream your full album, a few tracks, or just the single. The best part of their system is that they don’t charge you fees unless you sell something, so you have the freedom to put your product out there without having to worry about paying for something no one is using.
Isn’t that better than trying to sell your merch out of the back of your van?
President Obama will be signing the Jump Start Our Business Startups (JOBS) Act today. The act will make it legal for non-accredited investors to use crowdfunding to invest in startups. What this translates to is people who are non-accredited investors e.g. people with a net worth of less than $1 million or make less than $200,000 per year, can use an equity-based crowdfunding site like Crowdfunder.com to invest in starups with revenues less than $1 billion. These companies are being called ‘emerging growth’ companies.
Entrepreneurs who use crowdfunding to raise funds are limited to raising $1 million per year. Investors who’s income is less than $100,000 per year will be limited to investing 5% of their income or $2,000. Investors who’s income is over $100,000 are limited to investing 10% or $10,000.
The hope is that the law will spur innovation and create many, many new startups who will in turn create jobs. I’m sure this will happen over time but there are some risks as well. The biggest downside is the amount of unsuccessful businesses or half-baked businesses that will receive funding only to go belly-up months later because of lack of experience, bad execution or just plain dumb ideas.
There is also concern among financial regulators about the relaxing of some restrictions for emerging growth companies the law provides. For instance emerging growth companies will be free from the requirement “to hire an independent outside auditor to attest to a company’s internal financial controls, and restrictions on how financial analysts interact with investment bankers in promoting a company’s stock” for their first five years as a public company. This is more of a concern for later stage startups. Learn more about risks to investors the law creates here and here.
We’re excited about the law because of the attention the today’s signing will bring to crowdfunding. TuneFund is not an equity-based platform, we are a donation/reward based platform, however we are hoping for some halo effect from the media attention.
The Future of Music Coalition is an amazing resource for musicians. They provide research studies on a variety of music related topics. They published a simple yet informative article; 40 Revenue Streams, that list all of the ways a musician could earn money. The article also includes a brief intro that defines the two types of copyrights a song could have.
In today’s highly fragmented music landscape with multiple revenue opportunities you need to know where to concentrate your efforts and where to channel your music for greatest financial return.
Tom Dawkins, a co-founder of StartSomeGood.com, a crowdfunding site for social entrepreneurs makes an excellent point in a recent article on Dowser.org:
…we prefer the term ‘peer funding’—because there really isn’t an anonymous crowd out there just waiting to shower you with money, no matter how good your idea is. Every project is a unique community convened by that entrepreneur. And the ones that succeed do so because of hard work…
I have to agree and the same concept applies to crowdfunding campaigns by musicians. Most crowdfunding campaigns are funded by the campaign owner’s network of fans, friends and family which is why it is so important to be sure everyone in your network is aware of your campaign and is promoting it in their own networks of friends and family.
This takes a lot of work and dedication so knowing how big your own network is to begin with can help you set a realistic funding goal.
At last week’s Inside the Industry Artist Management Panel and Showcase event put on by RevebNation in NYC one of best quotes coming from the stage was, “If you can’t put a dollar value to your music you’re fucked.” The statement came up during a discussion about the need for musicians to be just as on top of the business aspects of their career as the music and creative aspects.
Like any other entrepreneur, independent musicians need to understand the money coming in and going out of their enterprise. You need to understand and quantify you’re monthly career expenses and figure out the revenue generated from your music. How much do you need to make each month to cover expenses and break even? How much do you need to bring in to make a profit? Are you hoping to cover all of your personal expenses and live off your music or do you still have a day job? When can you quit your day job? The questions you have to ask yourself are no different than the questions any other entrepreneur needs to ask as they go through their business planning exercises.
And the cool thing is, the better you understand your financial situation the freer you’ll be to create great music.
I’m half way through Rework, the business book by Jason Fried and David Heinemeier Hansson from 37signals. Its inspiring and refreshing and is making me even more anxious to get TunePledge to market. A couple simple pearls from the book include:
Start at the epicenter. A hot dog stand isn’t a hot dog stand without the hot dogs.
Start a business, not a startup. The truth is every business, new or old , is governed by the same set of market forces and economic rules. Revenue in, expenses out. Turn a profit or wind up gone.
Draw a line in the sand. A strong stand is how you attract superfans. They point to you and defend you. And they spread the word further, wider, and more passionately than any advertising could.
Most of the lessons in the book could be applied to a recording career. Believe in what you are doing, be frugal, constraints cause creativity and many more. Learn more about Rework and download an excerpt from the 37signals website. I bought the book used on Amazon for less than a round of drinks. Totally worth the investment.
As we’ve mentioned, the days of the traditional label deal and 90′s type recording career are long gone. In fact, the pursuit of a music label deal should be at the bottom of a musician’s list of priorities. The lottery-like odds of ever being discovered by a major (or minor) are probably the most important reason musicians today should self-manage their careers but when you drill down into the economics it seems almost silly to want to join a music label, especially a major or major subsidiary. Due to shrinking revenues from CD sales the reduced margins from digital sales, labels are putting more economic pressure on musicians by requesting 360 deals; deals that require the act to share profits from touring, merchandise and other revenue streams with the label – on top of the cut the label takes from the music. Seems like double-dipping.
Today musicians can manage all aspects of their careers with help from partners like bandcamp & ReverbNation and keep a much bigger share of the revenue they create. A hard working act may generate enough revenue to keep recording, touring and marketing themselves – why give up any left over profit to a label? Is a music labels marketing efforts going to be any more successful than an independent musicians? Do music labels know social media better than you? I doubt it. Most use interns or junior employees to manage their acts social media marketing.
The labels are passing on some of their risk to musicians with the 360 deal. Why assume any of the label’s risk? Musicians today should shoulder all of the risk associated with their career. Sure, its a lot scarier, but the rewards are all yours to keep. I would think long and hard about signing any type of deal today. If you’ve generated enough buzz to get on a label’s radar, chances are you can do just fine without them for the rest of your career.
The Crowdfunding Revolution: Social Networking Meets Venture Financing by Kevin Lawton and Dan Marom is a book released last year (and I think the only book of its kind) about the crowdfunding industry. The book provides guidance to people who are interested in raising money with a crowdfunding campaign.
Read the author’s blog here.