THE SECRETS BEHIND CROWDFUNDING

I’ve been involved for the first time in a project for a crowdfunding platform and felt really excited about it. However what will be the next step? How to persuade investors? It’s worth to consider some tips that should be the guideline for everyone who starts this business . Firstly be aware of fake investors. Second, raising capital should be a step step process, avoiding to do it fully in one time. The strategy would be to have a small investment at the beginning based on crowdfunding and retaining more ownership thank’s to raising money when there is a real need. The main advantage is that there are a lot of equity owners  and it’s easy to attract consensus, however it’s hard to manage the human and emotional side. As result of it, in some situations investors with few rights can be converted in majorites and In addition, It’s really important to look at the relationship between financial implications and future rounds. Some tips may considered regarding crowdfunding and incude analysing if the main platforms (Kickstarter, Indiegogo), have a rating system for crowd investors. Moreover, other important thing is to determine their rights and finally  it’s necessary to build a transparent and accurate communication ’cause it would add the business more value and more effictiveness The Jobs Act (Jump start our business start up) provides a legislation that recognizes the rights of fair use for crowdfunding investors, while facilitating the formation of capital between them. In addition, people with lower income are included as potential investors and the final goal would be to increase of employment opportunities. Many law firms, especially in America have becoming to support the these new technololgy  in terms of sponsorship. Not everyone will succeed in this business but a few minds will and the secret will be to have a deep look at the intellectual property rights (Patents, Trademarks, Copyright, Trade Secrets) before disclosing an original project.

robertson/crowdfunding-jobs-act-what-to-know-before-you-raise-money.html

How to predict hits

Two elements can be relevant for predicting a hit song. These are: The “velocity of the tagging” and editorial judgement. It is the result of an interesting analysis run by a company based in London called Shazam. The first aspect is related to the level of engagement between artist and audience and how quick it is their judgement in terms of tag data per day. Therefore, this also shows that the amount of interest expressed could be less relevant in comparison with the timing of response.

The process starts in choosing a leading indicator for the songs to be considered potentially succesful, providing a report of tag data per day who have been received by the platform. After that, the evidence shows that there is a relationship between the impact of the songs in commercial and the rise of them in Shazam chart. Once reached the number one position, a direct consequence was provided by the climbing of Billboard’s Hot 100 classify: This result happened for several artists that gained positions during previous year,  as Lana Del Ray, Frank Ocean…and it’s the consequence of an accurate analysis about data and metrics measuring the commercial viability of the song itself. There will be other predictions for the next year and there is already a list of the possible hits. In addition, record labels are using this system for testing new tracks and the tags can also be driven by TV as in the example of “Too Cloose”. Infact the evidence shows that happened a significant increase from 10 tag a day to ten thousands in a single day after being featured in an ad for Microsoft IE9.  “Somebody I used to know” was included in the prediction according to the data provided by the company and some songs included in the report were not still commercially released.

It’s worth to say that this tool can de defined as a new business model. This could be very useful for labels that feel the importance to understand the target audience and to decide where to put maketing efforts.

http://www.swpcontent.com/shazam-content/wp-content/uploads/2012/11/Top-Tagged-Songs-and-Artists.pdf

“THE COST OF ACQUIRING A FAN”

Last day i received an email by Music Xray, an interesting platform who every week targets listeners for evaluating how they perceive the songs suggested. In the most of the cases it promotes major artists whose tracks are potential singles eventough still not huge in terms of popularity and listenings. The process starts with targeting a certain number of audience (40 – 60) and the final aim is to turn the participants into fans of the artist/band while providing a calculation related to the ratio of people following the artist. Thank’s to a click, they are added to the mailing list and considered “acquired fans”. However, the statistic takes into account also people who doesn’t click the song. The cost of acquired fan is $0,66 if just one of two users is following the songwriter, that’s because the platform charges him 0.33 for each potential fan and in exchange the artist will be given his email address and link for facebook profile. Once again is another tool for improving the realtionship between the two and it’s very useful for evaluating how fast a certain artist is able to acquire fans, in comparison with other competitors of the same music cathegory. In addition, the listeners are targeted regarding their tastes and the style preferred. Finally all that is measured will be the level of engagement and this is necessary for adding value to the music.

http://blog.musicxray.com/fan-appeal-stack-major-artists-easy/

MY SPACE AGAIN??

My Space’s decline was mainly due to a series of factors that didn’t make this tool as easy and comfortable as its main competitors Facebook and Soundcloud who has now become  one of the most popular music uploaders. Well, the chief executive is thinking about a new plan for giving a new light to the first significant social network of our generation. It’s hard to give more details about the strategy but the team anticipates its user value, who will be provided by a new experience and not just a duplication of the previous model. While his main competitors stand for streaming services as Spotify and Deezer, one competitive advantage will be the analytic system who is inglobed in it and allows to know “who’s listening to”. It’s not uncommon that an A&R, as in the past, could find this tool more suitable for music research and selection, and once again this could be another positive feature. Another component that provides a competitive advantage, will be the design content and in particular the component of “fun” who is represented in it. The new product is named Specific Media and and the main focus will be on music. In addition it can analyse, through its new technology, who are the most engaged artist’s fans.

However, there is still uncertainty regarding the future profitability of the platform but a new step towards an improvement of the relation between audience and artist seems to be the key factor.

The control over the artists = failure

Young Buck’s record label is in financial trouble for the main reason of not differentiating its business. The bargaining power of a single agency controlling management, booking , business management side, has provided such a failure converted in bankrupt and unpaid loans. All that is necessary to avoid, is when this concentration implies the control of income and connections. Provided that is not easy for just one person to cover all these responsabilities, however it’s worth to understand that each intermediar takes care of different interests. For example  the manager’s aim is to undertake a long term relationship with the artist while the agent’s objective is to get as many gigs paid as possible. Well the monopoly of these different roles and responasibilities is definitively a cause of many problems as in the example of Young Buck. Especially when also the financial side is controlled by the business manager and there is only one agency that manage these different functions, this could be really dangerous for the company sustainability.  For this reason the artist, before choosing them,  should know very well the key players that will manage his career, and the agencies need to act independently from one another, this for avoiding mistakes. Maybe is suggested that at least for recording, the artist invests a certain sum of money independently, while the most important thing is to work with people that really feel involved in his project and that believe in negotiation with respect of the interests related to each party. We can conclude saying that the business diversification is essential for avoiding any bad consequence for your own career. This means that every agency needs to do their own job without overlapping.

http://spinme.com/2011/03/why-you-want-your-manager-your-business-manager-and-your-booking-agent-to-work-for-different-agencies/

LIVE MUSIC INDUSTRY IN TROUBLE!!

The impact of the recent hurricane Sandy in New York has provided a big debate regarding to the amount of losses who has been encountered in the live entertainment industry. Companies as Live Nation, AEG, are suffering in a significant way and the reschedule of the concerts is not a comfortable and convenient thing.

President of AEG, Randy Philips, says that this happening is serious because of involving one of the most significant entertainment industries and the amount of expenses encountered by stakeholders will be hardly recouped. That’s because at the moment it’s difficult to predict what will happen again.

This blog reflects the relationship between artist and promoter who don’t have to pay a guarantee provided that this is a case of force majeure clause application. On the other hand, there have been significant losses related to marketing and promotion costs provided by the cancellment of big concerts, apart from damages that not every venue covers in terms of insurance due weather conditions.

http://www.billboard.biz/bbbiz/industry/touring/hurricane-sandy-to-cost-live-entertainment-1007993472.story

THE BARGAINING POWER OF DIGITAL PLATFORMS

It’s a matter of fact that nowadays listening habits are changing, provided that a big percentage of U.S teenagers, accounting for at about 64, are getting used to listen music on YouTube, rather than watching MTV. Well the thing is that the former uses the videos provided by the latter with a result much more appealing in terms of listenings and watchings, earning huge advertising revenues. Let’s think how some popular videos as Gangnam Style have increased massively the popularity of K-Pop, having been clicked milions of times. These figures clearly benefit the image of those acts in terms of marketing and brand value. However, in terms of songwriters/cowriters shares, the result is not great.

Infact, the income generated by streaming,  has been considerated moderated by artists and record labels, while on the other hand there has been a significant growth in terms of revenues for the owners of the recordings. Spotify, as revealed from an independent Swedish label called Hibrys, doesn’t recognize any revenues for musicians and also publishers/songwriters get a low share. However this tool advantages the labels, providing that it has become so popular within them.

In addition, Pandora has reducing his royalties commtiments, on a basis that the satellite radio pay less than 10% of their revenues in royalty payments. Well this is unfaire, also taking in consideration that in Usa artists don’t get paid for air play.

So let’save the songwriters, let’s think about a new business model that could reduce the bargaining power of labels and digital platforms !!

guardian.co.uk

http://www.guardian.co.uk/media/2012/oct/10/music-streaming-songwriters-youtube-pandora

New App for Jazz Aficionados

 

A brand new app for Ipad was launched by Blue Note Records and developed by Grooveburg. This allows to keep jazz fans enjoying all the traditional standards from the past collections just for a affordable monthly fee of  $1.99. In addition they could share with friends their favourite songs creating group discussions and sending feedbacks. New tracks apart from an initial catalogue of thousand songs will be downloaded once they submit.

The main business idea has been provided thank’s to the partnership with Echo Nest and is the first to be commercially released through OpenEmi. Grooveburg will take care of designing and building stunning app, while Emi will provide licensing, distribution services. The president Don Was says that this is an incredible opportunity to create connections between label’s music and fans around the world.

The aim of the blogging is to propose new business models that can implement ways of communications between music listeners within a  certain nieche.

From the desk of Richard Walters

Richard Walters is an independent singer/songwriter from Oxford. His new album “Regret Less”, released in October 15th 2012, was autoproduced for the first time by himself. In his letter he says that is a good thing  to find financial support from the label, provided that the recording, mixing and mastering process represent an high expense. However this doesn’t make the artist free to make individual decisions about it. In the letter he just expresses the

will to let people hear his music not just because of money but because they could really feel engaged by it. He also talks about the importance to share music with friends, ’cause it happened to him at a time when he was just listener. Most records of his collection come from “personal reccomendations” , something they could not keep for themselves.

His aim is to let talk about his music and sharing it along with this letter. Finally he remembers the meeting with an A&R person, stating: “You’re great artist, but you’re the kind of artst that needs to die before they sell any serious units – It’s a Nick Drake situation” he said.

The blogs wants to express the need to support independent artists through simple spread of voice or ‘word of mouth’.

http://www.richardwaltersmusic.com

Business Matters: Spotify UK Shows That the Freemium Model Is Not ‘Unsustainable’

ottobre 09, 2012   |   By Glenn Peoples (@BillboardGlenn), Nashville

A business model that pays rights holders nearly every dollar, euro or pound generated is clearly not sustainable. This fact is obvious to Billboard readers as well as a digital service’s management and the company’s investors.

Last week I wrote about Spotify’s financial statements posted at PrivCo, a website that posts the financial statements of privately held firms. My first impression was that PrivCo’s numbers looked off. After PrivCo’s CEO sent me a link to the full financials and walked me through the numbers, I better understand how the numbers line up — but I don’t agree with his negative assessment.

Spotify is indeed losing money, but I don’t think its business model is unsustainable.

The difficult with assessing Spotify’s prospects is that its financial statements tell many stories at once instead of one single story. Because the service operates in many different markets and launched at different times, Spotify is effectively many companies within a company. And each of those companies has a business model that apparently needs time to develop.

Spotify operates a freemium business model that offers free, ad-supported listening in the hopes of luring paid subscribers. The model is a leap of faith. Spotify is on the hook for the free streams whether or not it monetizes them. It hopes people will sign up for the paid subscriptions. Labels and publishers hope, too.

But the model has attracted investors in spite of its critics. According to the financials posted at PrivCo, Spotify ended 2011 with cash and cash equivalents of €104,271,498 ($135 million), up from €47,251,972 ($62.6 million) in 2010 and €2,083,601 ($2.99 million) in 2009.

More money is reportedly on its way. The company is said to be near a $400 million round of funding that would value the company at $4 billion.

Paris-based Deezer, which operates the same freemium business model, just raised $130 million in a round led by Access Industries, the owner of Warner Music Group. Deezer now has 2 million subscribers to Spotify’s 4 million subscribers.

There should be a natural lag time in the success of a freemium business model. When Spotify enters a new market, it has a relatively high number of free listeners, a relatively low number of marketing partnerships and a relatively immature advertising sales force.

The model itself suggests a lag will occur. Free listening is used to encourage people to try the service before becoming subscriber. The more people use the Spotify, the more people share listening on social media, the more likely they are to eventually subscribe.

If we could see Spotify’s financial results from just one country, we could isolate its business model and reduce the noise from other markets. Financial results from one country might show this lag. Financial results for the entire company show more than a dozen lags happening at different times.

Indeed, proof of the lag time can be seen in the UK. As Billboard.biz reported in September,Spotify reported a net loss of only £2.1 million in the UK in 2011. Clearly the launch in the U.S. in the summer of 2011 weighed heavily on the financials of the company.

Financial statements for 2011 found online show Spotify Ltd., the UK subsidiary, posted a £2.06 million loss in 2011 after posting a net operating loss of £26.5 million in 2010. Revenue grew 51.1% to £95.5 million from £63.2 million. (Due to an intracompany sale of intangible property, Spotify Ltd. actually turned a net profit in 2011.)

The key evidence of the freemium model’s lag time appears to be Spotify Ltd’s improved cost of sales, which represents royalties paid to rights holders. The UK subsidiary’s cost of sales dropped to 85.7% in 2011 from 102.6% in 2010. In other words, Spotify Ltd. paid rights holders about 1.03 for every pound it generated in 2010 but paid out only 85 pence from every pound it generated in 2011.

Another key factor was the improvement in subscriber growth. Subscriptions accounted for 84.8% of revenue growth in 2011 and grew as a percent of revenue from 71.3% in 2010 to 75.9% in 2011. The company obviously got better at converting free listening into paid listening and using partners – such as Virgin Media – to bundle the Spotify with broadband service.

These two factors show the freemium model has potential but will experience a lag as cost of sales becomes manageable and the lure of the freemium model takes time to positively impact subscriber counts.

The key is cost of sales. When Spotify Ltd improved cost of sales by 16.9 percentage points in 2011, it gave itself an additional £16.1 million to cover costs. By lowering costs of sales again in 2012 – through better monetization of free users and better conversion to subscribers – Spotify Ltd. will generate even more gross margin. At its current pace, Spotify Ltd. should be able to turn an operating profit in 2012.

When Spotify US will turn an operating profit is another story. It goes without saying that the Spotify launched in 2008 in the U.K. would have a far better cost of sales last year than the service that launched in the U.S. in July. A large market such as the U.S. will require years of hard work.

Every market is different. In Sweden, for example, Spotify helped streaming services account for 89% of all digital revenue in the first half of 2012, according to the Swedish Recording Industry Association. But nothing is mentioned about Spotify’s inability to resuscitate a moribund Spanish digital recorded music market that ranked five places behind Sweden — #9 vs. #14 – even though Spain has population five times greater.

The freemium model might not work in Spain right now. Not much is working in Spain right now. Even a workable business model has to deal with difficult exogenous factors such as social norms and economic malaise. But the 2011 financials for Spotify UK show that a freemium model can work over time.