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Sunday, 2 January 2011

Trends of 2010 No.9: Music Investment

Trends of 2010 No.9: Music Investment: "

The ninth part of our end-of-year roundup, originally published in the Music Ally report. New to the series? Start from part one.

With so many tools available for bands to distribute and promote their music themselves, the question of whether bands really need labels regularly reared its head in 2010. It came back down to two things: someone to supply the initial investment, and someone to handle the day-to-day tasks around the business of music.

The investment issue was highlighted by an IFPI report in March, which claimed that labels invest around $5 billion a year in music talent – around 30% of their sales venues, with more than half of that going into A&R. As the report pointed out, that compares well to the R&D budgets of other industries.

“No other party can lay claim to a comparable role in the music sector,” said a bullish John Kennedy. “No other party comes close to the levels of investment committed by record companies to developing, nurturing and promoting talent. One of the biggest myths about the music industry in the digital age is that artists no longer need record labels. It is simply wrong.”

Yet three alternative sources of investment for artists were making waves in 2010: corporate investment, fan-funding services and brands. None was new as such, but the year gave us more of a sense of which artists they applied best to, and how successful they might be.

Corporate investment schemes may have a whiff of tax breaks for rich folk about them, but the UK success of artists like Madness and Prodigy have shown that financial backing can be a platform for older acts looking to make a comeback.

In both cases, once the initial investment was secured, the key was those artists partnering with savvy labels on their own terms, to help make their albums hits. The fact that in both cases the music was a return to form was, of course, also important. 2010, however, did not provide any evidence to contradict the assumption that corporate financing has yet to crack the challenge of breaking new bands, rather than reinvigorating old ones.

Fan-funding has gone through some rough patches, notably with SellaBand’s bankruptcy and subsequent sale. 2010 saw a definite shift in artist awareness of the rights given up to the first generation of fan-funding startups too. However, this was also a year for a new generation of fan-funding firms to make their mark: Kickstarter in the US and Pledge Music in the UK, for example.

So while Public Enemy embarrassingly failed to reach their initial target in a high-profile SellaBand funding drive, legions of unsigned or independent artists were taking advantage of Kickstarter’s flexibility to raise money for a host of different goals. Pledge, meanwhile, built bridges with labels and name acts, before late in the year announcing plans to offer label and publisher-like services to the most talented acts on its platform.

There were success stories too: the most startling coming in March when US artist Ellis Paul raised $100,000 to record a new album from just 300 fans, using Nimbit’s platform. “Many donors were just waiting to have an opportunity to help him financially,” explained his manager, hammering home the point that fan-funding works best for bands who already have a strong, engaged relationship with their fans.

Then there were the brands, with treadmill-toting viral stars OK Go filling their boots with brand partnerships, pinging between insurance firm State Farm, consumer electronics maker Samsung and Range Rover. Do they sell many records? The jury is out, but this band have certainly showed others one path to secure the necessary investment to continue making their music.

Finally, there were encouraging stories of D2C success from Amanda Palmer and Pixies on the artist side – among many others – and Bandzoogle and Bandcamp on the platform side. 2010 showed that D2C is not the label-killing panacea that it’s often talked up to be, but for the right artists with the right fanbases, it can be lucrative business.

Music Ally Trends of 2010 1. Growth and Decline 2. Pressure on ISPs 3. Pirates Under Attack 4. Mobile Apps Mania 5. Clouds and Silver Linings 6. The Economics of Streaming Music 7. Music Gets Socialised 8. Google versus the Music Industry 9. Music Investment 10. Music TV Makes a Comeback


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