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Alternative Financing for Music

Alternative Financing for Music. Kieran Garvey Research Programme Manager. @CambridgeAltFin. Overview. Background History European Market Data Alternative Finance Channels & Instruments Key D rivers Behind Growth of Alternative Finance in Music Case Studies. Mozart on Crowdfunding Music.

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Alternative Financing for Music

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  1. Alternative Financing for Music Kieran Garvey Research Programme Manager @CambridgeAltFin

  2. Overview • Background History • European Market Data • Alternative Finance Channels & Instruments • Key Drivers Behind Growth of Alternative Finance in Music • Case Studies

  3. Mozart on Crowdfunding Music • 1783-85Mozart had 3-4 subscription concerts • 174 subscribers for one of these • Included their names on the manuscripts • His series of six concerts in Mehlgrube also secured 150 subscribers each (Morrow 1989) • Each person paid an estimated 800 EUR in today’s currency (Baumol & Baumol 1994)

  4. Modern Era – Why Music? 1997 – Marillion – UK Rock Bank raised US $60,000 - funded by fans: "The Internet saved us, really. In 1997, our manager said to us we would have to find something else to do. Marillion wasn’t earning enough money,” keyboardist Mark Kelly. Would you buy the album in advance? "We then sacked the manager!” 12,000 pre-orders 2001 - Artist Share – Brian Camelio A Boston musician, founded world’s 1st crowdfunding platform

  5. European Market Data

  6. Alternative Finance in Europe - 2014 Cambridge-EY (2015)

  7. Kickstarter - Music Crowdfunding Data

  8. Reward-Based Crowdfunding : Average Donation Remains Small

  9. Crowdfunding Channels Four key actors: • Creative entrepreneurs (e.g. artists who want to record an album) • Funders (e.g. fans who support their favorite acts with donations) • Crowdfunding platform (provides infrastructure and rules governing the transfer of resources from contributors to project initiators). • Service providers (e.g. video, marketing, PR, project managers)

  10. Channels: Platforms with a Music Focus

  11. Applications of Alternative Finance: Music Audio: e.g. Pledge Music & SellaBand Technology: e.g. Kickstarter & Crowdcube Concerts, gigs, events: e.g. Living Indie & OpenStage Scholarships & Research: e.g. Hubbub & Experiment

  12. Why Fund? Rewards Crowdfunding Motivations Quality of the campaign Doing social good My money making a difference How the money will be spent Quality of the team Supporting a local project Supporting someone I know Be part of the creative process Getting a unique reward Curiosity Funding to date Peer pressure

  13. Musicians - Why Choose Rewards Crowdfunding? Non-financial benefits – PR/Press More control over my project No equity or debt Unable to get funding elsewhere Money from real people Transparency Unable to find local funds Raise on my own terms Speed Curious Creative input of funders

  14. Top Challenges Raising Finance Via Crowdfunding Sourcing funders & marketing Developing campaign material Fulfilling & delivering rewards Communicating with funders Setting up campaign page Developing plan and pitch Finding the right platform Setting up rewards/tiers The application process

  15. Benefits of the Crowd Networking and connections Marketing/Advocacy Proof of concept, market validation Help with project Their expertise and knowledge Involvement in creative process Help with follow on funding

  16. Key Factors Affecting Success • Quality • Contact and engagement with fans – comments, updates • Large social networks associated with success • Engaging friends and families • Crowdfunding instrument or channel e.g. rewards or equity • Rewards or bonuses to enhance active participation • Platform dynamics e.g. listed on top 5 priority listing • Momentum is key

  17. Changing Dynamics of the Music Industry • Internet and digitalization - has listener-to-listener music exchange easier than ever • New and evolving channels of promotion and distribution • New ways of organizing the relationships between artists and the institutions that release their music • iTunes, Spotify, SoundCloud etc… highly successful without making investments in the production of content • Cuts to state funding in arts and culture • Artists therefore looking for new sources of income with revenues from live performances and music publishing

  18. A Changing Music Industry Music Marketing and Distribution • Commercial success highly unpredictable • Banks not willing to finance production– ‘nobody knows property’ • Record labels have production, distribution and promotion know-how • BUT major changes in music marketing Few changes to the traditional model of financing records • Record companies cannot predict what will be successful • Market research produces few answers. • Crowdfunding may be shifting the risk from producers to consumers to solve the problem of “nobody knows property (Caves 2000, 2003)

  19. Music Financing: An Enabling Infrastructure Technology infrastructure • Alternative finance platforms • Payments • Digital content, live streaming Social infrastructure • Social media • Content, content, content • Peer and network marketing – super distribution

  20. Case Studies – Crowdfunded Albums Maria Schneider’s - Concert in a Garden 2004 • Artist Share 2004 • Raised $130k • One $10k fan listed as executive producer • Album sold exclusively through Artist Share • Picked up 2005 Grammy for ‘best large jazz ensemble’

  21. Case Study – Amanda Palmer 2012 Theatre is Evil - Amanda Palmer & The Grand Theft Orchestra 2012 • 24,883 backers • $1,192,793 • Most successfulmusiccampaignever ???

  22. Case Studies – Technology Sunhou.se - Kickstarter • Sensory Drums – organic and synthetic • $94,245 USD • 328 backers Mind Flood – Crowdcube • Musical Lego • $236,000 • 152 Investors • 19.27% Equity Pono Music – Kickstarter • Digital Music Player • $6,255,355 • 18,220 backers

  23. Case Studies - Gigs and Concerts Foo Fighters - Rock 1000 KrowdPop OpenStage

  24. Case Studies – Research and Scholarships Hubbub • Send Rosie to Harvard Experiment • Can music improve memories in patients with brain damage? Prodigy Finance • Student Finance

  25. Case Study BlockChain & Micropayments Peer Tracks • PeerTracks – an artist equity trading system for fan engagement and peer-to-peer talent discovery. • Every artist can create their own, limited edition tokens, bearing their brand and name. • Asub-cryptocurrency, whose value directly reflects the appeal of the artist. • Fans can buy tokens of unknown artists while they are cheap, speculating on their future potential. • Artists can influence their tokens' value through a buy-back mechanism.

  26. Trends for the Future • Subscription models • Revenue share • Match Funding – Arts Councils, Creative England • DIY crowdfunding - Brewdog • Cross border funding • Crowdsourced gigs – OpenStage, KrowdPop

  27. The Future: Cambridge Centre for Alternative Finance Survey launching in Q4 2015 to cover five global regions • Americas (launching October 15) • Asia-Pacific • Greater China • UK • Europe Network of Cambridge research partners in each region • Americas: University of Chicago (Booth School of Business) • China: Tsinghua University (Shenzen) • Asia Pacific: University of Sydney

  28. Cambridge Centre for Alternative Finance Website: http://www.jbs.cam.ac.uk/ccaf Twitter: @CambridgeAltFin Email: kjg44@cam.ac.uk

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