Wednesday, February 07, 2007

Artist Capital and the User Generated Record Label

I scribble down ideas. It used to be a lot of ideas, now it is far fewer. But one idea that I was always fond of was one from several years ago around the notion of "artist capital" - or more accurately, establishing a virtual stock makret where fans can invest in up-and-coming artists.

Most of the ideas I jot down are really high-level, usually just a few bullet points and a sketch, and this particular one said little more than:
  • Network of entertainment/music financieers and music distribution infrastructure
  • Songs are posted/distributed, people can "invest" in the band
  • Established bands can raise money for tour and merchandise without using their own money
  • Investment can be used for studio time/production, video production and/or marketing promotion
  • Investors share in the profit of band's earnings (tours, downloads, merchandise, etc.)
  • Eliminates traditional record label infrastructure

So, I was very excited to see that somone (obviously far more motivated than I) got a very similar model and service built for indie artists. It is called SellaBand, they are run by some ex-major label guys in Europe, and I just discovered them yesterday. I think they have done some very interesting things, and obviously have a nicely flushed out model with some interesting angles that I had never thought of.

Here's how it works...

Sellers (the artist), post their content (generally demos) to where investors (the fans) can find them and listen. If the fan is a "believer" they can then invest $10 in the artist. Once the artist has 5000 believers (aka $50K raised), SellaBand will then finance a recording studio, producer, A&R consultant and physical CD production. They take the resulting content and make it available for free to the public (presumably as unprotected MP3s) for download. They also send each investor a physical CD (there's their $10 back right there).

Where's the money? Well, SellaBand does a 3 way advertising revenue share between themselves, the artists, and the investors. The split between groups of sellers/believers is based on the popularity of the artist's content on the site. Additionally, they will provide CDs for the artists to sell at their shows (or online).... the revenue from each CD is sold is split 50/50 between the artist and the investor. It looks like they are getting ready to launch a webshop soon for artist merchandise, and I'm guessing a similar revenue share model will be instituted there.

I'm biased, but I love this concept. The artists have a vested interest, the fans have a vested interest to promote their artist, and the consumers win with free MP3s. The only thing I'm leary of is the advertising revenue (how much is there to split), and the fact that to generate the ad-revenue Sellaband needs to bring everyone to their front-door (limiting syndication/viral distribution opportunities). I think there are solutions to both, and it will be interesting to see if (and how) the model is tweaked in the future.


Unknown said...

I like the idea of sellaband, but real profit in today's music business is around publishing and sponsoring deals. Publishing is a low profile activity but its like good wine, long term investment.

Netvalar said...

As with any great idea in the Indie world Netvalar can be found I would love to know your believer profile name so I can stop by and say hi. Also if you haven't found it yet there is an unofficial forum at