Home Home I think I’ve figured Out The Music Industry’s New Business Model

I think I’ve figured Out The Music Industry’s New Business Model

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Instead of selling our copyrights to record labels, fans could pre-order digital downloads and also receive a small slice of the album’s future profits. It’s basically Kickstarter, but instead of enticing investors with stupid prizes, they get a cut of the profits like a grownup.

For example, the Foo Fighters need $600,000 to record and promote their next album. They sell a 10% stake of the profits at $10 per 0.00017%. 60,000 fans pre-order the album and receive a digital download along with a 0.00017% stake.

Assume they sell 1,000,000 copies and make $7 profit on each copy…each investor makes $119 and the Foo Fighters keep the rest.

It’s all about spreading out the risk. If Sony Music invests $600,000, that’s a lot of risk. If 60,000 fans bet $10 on an album they would have bought anyway, it effectively becomes risk free.

That’s the long and short of it.

Here’s my long pitch if you’re interested:
Digital music is not a product. It is an idea that derives its worth purely from copyright. The only reason we (the band) can charge $10 for a digital download that costs us nothing is because the US Government has granted us a 140 year distribution monopoly. This provides the perfect opportunity to add value to a transaction. We have something that is worth $10 to the consumer, but costs us nothing.

Broke musicians have one thing to barter with: our copyrights. Back in the day, the clean swap of copyright for recording time and distribution seemed fair. But recording is no longer prohibitively expensive and digital distribution is essentially free. So the idea of selling a copyright to a record company in 2012 seems ridiculous. Without those two barriers to entry, record labels are essentially overblown marketing firms. The gatekeepers’ gate has disappeared.

Armed with free distribution, we could pre-sell downloads to fans and package in a small percentage of the profits.
This is an awesome deal for the fans. All they do is pay the normal ten dollars for an album, but now it comes with the chance to make that money back, or perhaps even turn a profit.

It’s an even better deal for musicians. We keep control and the majority of the profits. Plus, we don’t have to pay for recording and promotion out of pocket, so there’s no risk of losing money. We also score an army of sales reps disguised as fans with a personal stake in how well the record sells.

The best thing about this model is how it scales. It works for everything from shitty local bands all the way to international best sellers. $10 won’t get you a very big stake in the new Coldplay album, but it could get you 1% of a local band’s debut. Hooray for free market principles!

Music is an incredibly risky investment. Record labels mitigated the risk by making a lot of investments. They were like casinos. The house makes so many bets, no single instance can affect the big picture. One blockbuster album paid for the twenty that lost money.

My system mitigates risk even more effectively. Instead of spreading the risk across lots of investments, we spread the risk across lots of investors. Then we mask the risk even further by hiding it behind an album download with no real value but a perceived value of $10.

It’s a whole lot of people taking a little bit of risk with money they would have spent anyway.

Recordings are becoming more of a promotional tool than the main attraction. Live shows, merchandise, and licensing are now the prime sources of revenue. Your average musician is far less concerned about this than record labels are, since musicians never made much more than 15% on album sales anyway.

If we can find a new source for the initial investment, we could cut labels out of the equation entirely, retain control over our music, and keep a much higher percentage of the profits.

Musicians can make just as much money as we did in the past. The solution is cutting out the record label. Even if we sell half as many copies, if we take a 50% cut instead of 15%, we actually come out ahead.

Original Source Reddit by ActionFrank

  • http://www.candylandrecording.com/ Alex

    Are you kidding me i mean really are you kidding me …That`s not a business model. A business model is when Artist make money the distribution company makes money and the consumers get more for there money and the consumers spend less not more. If that`s the best you got you need to re-think it. By the way you need to start with a minimum of $350.000 for the R&D and your just getting started