CMU Weekly Editor's Letter

Editor’s Letter: Does the future lie in your fans’ pockets?

By | Published on Friday 25 May 2012

Andy Malt

Fan funding has been in the news this week, as it often is these days. But this week it’s been more interesting than most because two reasonably big artists, Amanda Palmer and Ben Folds, have given insights and opinions on it based on their own experiences of raising cash from fans rather than labels to get projects up and running.

Amanda Palmer, of course, is the new darling of fan funding (or ‘premium pre-ordering’ as it’s been repositioned as of late) after she started a project on Kickstarter to raise $100,000 for a new solo album, an art book and a tour. She hit that target in just six hours and had $350,000 within two days. As I write, her total stands at just over $850,000 with just under a week to go.

It’s generally expected that by the time the deadline for raising funds comes around on 31 May, Palmer will have $1 million to her name. This begs the obvious question: If she only wanted $100,000, then what’s she going to do with the other $900,000? Or to put it in the words of one of her Twitter followers: “So, are you loaded?”

This question prompted a lengthy blog post from Palmer this week, breaking down exactly where all the money will go, and why she won’t end up with just under a million in the bank.

Firstly, there’s the fact that prior to the Kickstarter project being launched, she borrowed $250,000 from friends and family to prepare everything that was needed to get her to the stage of presenting her plans to her fans. Then there are the continued costs of all this activity, which were always going to exceed $100,000, not to mention various commissions, fees and staff costs along the way.

Then there’s the simple matter of economics – the more you sell of something, the more it costs to produce it. Each person who has paid money into the project will at the very least receive a download of Palmer’s new album, the delivery of which has some albeit nominal costs. But, more importantly, in addition to that, the majority of her backers have purchased more than just a download, they’re expecting CDs, vinyl, books, gig tickets, gigs in their houses, dinner with Amanda, hand-painted vinyl turntables and more.

All of this costs money, and that’s what a big chunk of the remaining Kickstarter cash will go on. And, while corners could always be cut to save some money here, Palmer knows that so many fans have committed so much upfront because they trust her to deliver quality goods. Fail on that promise and future pre-order projects won’t go so well. Writes Palmer: “I could send you all cheap-ass jewel case CDs, fire my staff, make a cheap book on Xerox paper, and tour just with a solo piano with no crew, no band and RAKE IN THE DOUGH. I mean, I could potentially do that and walk with close to half a million dollars. But the products would suck and the tour would be a solo piano tour, and nobody would ever trust me again”.

For some artists as well as fans, Palmer’s outline of where the million she has raised will go should make for interesting reading. These are the costs that traditionally a label would not only cover in its upfront investment, but also manage, often without really explaining to an artist where the million dollars promised in a record contract is going (normally because, especially in bigger labels, no one person at the record company necessarily has a handle on all expenditure).

I suspect this fact alone accounts for a lot of the resentment that exists between a lot of artists and their former labels, especially when a project doesn’t turn out so well in the end. They’re told a lot of money was spent, and there’ll be a spreadsheet that documents the expenditure somewhere, but because no one outlined the grand plan at the outset people tend to assume someone screwed up, or something dodgy went on.

Which, I suppose, is one of the liberating things for artists who go the fan-funding route and suddenly enjoy so much more insight and control. Though having to work out these kind of logistical plans, manage all that money, and make it all happen, even with a good management team, is probably quite scary. Plus, if it all goes wrong, or the end product ends up being a bit rubbish, there’s no label to blame it all on!

But back to Amanda Palmer, who I am sure will deliver the goods in every way – she and her team certainly have a good record here. But what’s possibly most interesting about Palmer’s Kickstarter campaign – given what we now know about her budgeting – is that had she raised just $100,000, the whole project would have been deemed a success by the outside world, but Palmer would still have been in considerable debt. Certainly she would have relied on the revenue the outputs of the project might generate (traditional download sales etc) to break even, rather than looking at that money as the way she might personally profit from the endeavour. Which would have been a rather risky approach.

Almost certainly Palmer and her team expected this project to raise considerably more than $100,000, but were cautious when initially declaring their targets. The outcome of this project will be a major-label level album campaign delivered without major-label involvement or interference, but would something of that scale be possible via the fan-funding route for an artist who couldn’t expect considerable investment from the start – ie anyone who isn’t, as Palmer puts it, a “major label refugee like me”?

Ben Folds, who is currently raising money for a new Ben Folds Five album via PledgeMusic, recognises that those who have previously enjoyed success (usually via major label investment and marketing) are at a distinct advantage.

He told Forbes: “[Fan funding is] going to favour whoever can manage to engage the biggest audience on their own. Those will be the people who benefit the most from it. And the ones who know how to do things cheaply, because even if you raised a million dollars, if you spent a million and a half, it’s just like the record companies, it doesn’t benefit you at all. I think someone has to have a little bit of a head start before they Kickstart”.

However, he continued: “That’s always been the way in the music business. If you went down the laws of the things you know to be true about the music business, you’ll see that nothing is really changing. If you’re going to do well on Kickstarter or PledgeMusic, you have to have a leg up. You probably got your leg up by doing it yourself and getting out and playing gigs”.

I suppose there’s some optimism there – the ‘leg up’ might be a former life with a major label deal, but it might just be prolific touring and clever fan engagement (the Enter Shikari approach if you like). Perhaps new bands ultimately will be able to pursue major projects without major label support, utilising fan investment (or pre-orders) to remove the financial risk, and putting in place a great management team to take responsiblity for delivering everything else.

Though, it has to be said, so far most of the artists who have made headlines in the world of crowdfunding and direct-to-fan have had some sort of success (and usually considerable success) as part of the major label system previously – Amanda Palmer, Trent Reznor and (at a push) Radiohead, for example. For new bands, there’s still the issue of critical mass (do you have enough fans?), not to mention the negative inference many people will make – big names using fan-funding for creative reasons, new bands do it because they have no choice.

But perhaps there’s a middle way. We’re starting to see smaller labels using the fan funding system for their artists. Sometimes this might be for an entire campaign, or just a small part of it. In the case of a label I spoke to yesterday, a band had proven to be far more successful than they had expected and they felt another music video for a track from the band’s album would help to maintain the momentum they had built up. However, it’s an indie label with tight margins and this hadn’t been budgeted for, so they turned to the band’s fans.

You might say, but why work with a label if they aren’t putting in the money? But the label is doing more than just that, remember, there’s all the planning and logistics and worry and risk of just making big music projects happen. Some artists will have managers who can do all that, but many will not. Of course, the stigma that can come with new bands going to fans for upfront cash can still apply here, even when a label is involved, though I do believe that’s really just a PR challenge. If pitched correctly, the fans will feel involved in the career of one of their favourite bands, and if the rewards for investment are good enough then they won’t mind stumping up for them.

And this artist-fan-label partnership system potentially benefits everyone involved. One of the barriers to setting up an indie label and making a success of it has always been and always will be the money. You might have all the skills and knowledge needed to run a label, and the ideas and passion that are so important, but the bill for launching an artist runs into the thousands, and for some new label chiefs thats a barrier that can’t be crossed.

On the other side, a band might be able to raise enough cash directly from fans to record their album and have it pressed, but there’s a lot more to releasing a record than that. A record label might not be able to cover all an artist’s costs, but by partnering with one on a fun-funded project, a band could gain access to a team of people who have the time and skills to deal with the business side of things, and to ensure that the fans get everything they were promised at the outset.

So perhaps fan funding isn’t just for major label refugees; by new artists and new music entrepreneurs coming together on such projects, perhaps fan funding could deliver us both great new artists and great new labels too

Andy Malt
Editor, CMU

This week’s podcast features even more discussion of the fan funding model, as well as Beach House and The John Butler Trio’s battles with advertising agencies, Bono’s Facebook millions and the reunions of The Stone Roses and Black Sabbath.

The podcast will be online later this weekend here.

So, continuing a trend I really hope will end soon, I again start this week’s news section with the death of an great popstar. The Bee Gees’ Robin Gibb finally succumbed to the cancer he had been suffering from for some time. Read our obituary here.

In digital music, both YouTube and German collecting agency GEMA appealed against a recent German court ruling which said that YouTube must ensure that songs represented by GEMA do not appear on its site. YouTube wants the ruling overturned, while GEMA wants more legal certainty around the rights its members have to protect their content online. Meanwhile, Spotify finally arrived in Australia and New Zealand. Though rather than excited flag waving, the company’s Antipodean MD was given a hard time over royalty rates by a presenter on the Triple J radio station.

In the US, Facebook floated on the stock market, which was fun for all involved. Well, it was for the few hours before its share price crashed and some people involved in the IPO were accused of dodgy dealings. Rubbing his hands together, though, was Bono, who was reported to have gained $1.5 billion from selling a stake he owned in the social network. However, when someone sat down and actually looked at the figures, it turned out he’d made nothing like that sort of money.

Over at HMV, the sale of HMV Live (aka MAMA Group) is moving nearer to completion. It was reported last week that AEG Live had been given preferred bidder status. However, it’s now thought that AEG only wants some of MAMA venues, with the rest of HMV’s live division being prepared to go elsewhere.

As well as the GEMA v YouTube appeal, there were many more goings on in the pop courts this week. Or not, in the case of Joel Tenenbaum, when the US Supreme Court refused to hear an appeal against the damages he was ordered to pay after being found guilty of file-sharing. Also refusing to do things was Kim Dotcom, who declined to reveal passwords which would give New Zealand police access to encrypted data that they seized from his home earlier this year.

Elsewhere, Doobie Brothers singer Michael McDonald joined the long line of artists with pre-internet record contracts suing major labels (in this case Warner Music) over royalty rates on download sales, and George Clinton settled out of court with The Black Eyed Peas over the unauthorised use of a sample from one of his songs.

Still in the pop courts, The John Butler Trio won a case against Poptent, an ad agency which used a sample from one of their songs for an advert for Dannon Oikos Greek yoghurt. And presumably soon to launch a similar lawsuit are Beach House, who noted this week that a song very similar to their own ‘Take Care’ is featured in a new VW advert.

In festivals news, Vince Power’s publicly listed festivals company Music Festivals plc was forced to admit to investors that ticket sales have been slow this year and the market as a whole isn’t doing so well this year. As if on cue, Golden Down and Cloud 9 announced they were cancelling their 2012 events.

In happier news, some people got back together this week. One Direction were played on Capital FM for the first time since February, when the station banned them for thanking Radio 1 when accepting the Capital-sponsored Best Single BRIT award, and The Stone Roses played a surprise free show in Warrington. Black Sabbath also performed a reunion show last weekend, though not with drummer Bill Ward, whose war of statements with his bandmates has continued this week.

And finally, how about I leave you with news that Justin Bieber’s penis is called Jerry? You wanted to know that, right?

This week we ran a great interview with Saint Etienne, and an also great playlist from current OFF! and former Black Flag frontman Keith Morris. In his column, Eddy Temple-Morris wrote an open love letter to Wall Of Sound boss Mark Jones, and in the Beef Of The Week column Alex Reid proved that cagefighting is good preparation for a pop career. And if it’s festival line-up news you want, then you only need look here.

In the CMU Approved column this week we had new music from How To Dress Well, Débruit, White Fence, ZZZ’s, and an amazing night of Techno due to take place in Detroit this weekend (if you happen to be near Detroit).

As well as that, we had album streams from The Walkmen, Sigur Rós, Alt-J and Fixers, plus more new music from Antony & The Johnsons, Metric, Peace, Foxes, Julio Bashmore, Nathan Fake, and Faye. And should you wish to see Josh Homme talking about The Scissor Sisters or Professor Green making beer, now is your chance.