PETER SPELLMAN is Director of Career Development at Berklee College of Music, Boston and author of several business-building books for musicians. Find him at mbsolutions.com

In 1997 when 80s prog-rock band Marillion scheduled a European tour to support its new album, keyboardist Mark Kelly posted an Internet message stating that the band would not tour the United States due to a lack of record company support. Fans of the band worldwide joined forces to raise over $60,000 to underwrite it, and the band undertook its largest North American tour since 1991. Since then, Marillion has been able to tour and record several more times all based on direct fan support. As a result, such passionate, wholesale support has allowed Marillion to step outside of the conventional music industry and find their own path.

The thing that made the difference in the Marillion story was the Internet. The saga represents one of the first modern examples of 'crowdfunding' via the Net, and illustrates the bottom-up strategy where the fan/customer is the new driver of music markets.

Several music services have now emerged that are taking this idea into new territories.

In this article I'll try to shed some light on a few of them. But don't think things end here. These offerings are fluid and dynamic, and will probably look quite different in just a few months than they do today.

Crowdfunding is related to Crowdsourcing. Crowdsourcing is taking a job traditionally performed by a designated agent (usually an employee; or, say, a record label) and outsourcing it to an undefined, generally large group of people in the form of an open call.

Crowdfunding grows out of crowdsourcing and occurs for any variety of purposes, from disaster relief to citizen journalism, and from political campaigns to artists seeking support from fans.

Crowdfunding can replace the need for specialized grant applications or other more formal and traditional fundraising techniques with that of a more casual, yet powerful, approach based on crowd participation.

The Internet, of course, takes the crowdfunding dynamic to a whole new level, providing new streamlined approaches to quickly imitate the co-op model for low-level and/or sudden needs (ie. disaster relief, travel expenses, legal fees and so on.). It is for this reason that the term can be used to encompass the act of informally generating and distributing funds, usually online, by groups of people for specific social, personal, entertainment or other purposes - a la the Marillion story.

For the music space, I like to call it "arts patronage for the masses."

This approach is used widely among music industry artists to bypass music publishing companies and "go direct" to their fans who are now seen as much as investors as listeners. Several music services have arisen based on the crowdfunding idea.

Let's briefly look at three: ArtistShare, Sell-a-Band and Slice-the-Pie.


1. THE MICROFUNDING OPTION: ARTISTSHARE
(artistshare.com)

Since 2002, ArtistShare has been enabling fans to finance artist projects in exchange for access to the artist's creative work. It was founded in by Brian Camelio, a professional musician/computer programmer, in response to the threat of digital piracy and the futility of digital rights management for music.

ArtistShare uses micropayments to allow the general public to directly finance, and in some cases gain access to extra material from an artist. The artist determines the tiers of fan involvement and attaches a cost to each tier. With a dozen or more projects by various ArtistShare artists underway at any given time, music fans, patrons of the arts, and creative process junkies have an unprecedented window on the act of creation.

Participating artists raise funding for their recording projects through their fan base by offering special interactivity options, like the opportunity to download scores-in-process or watch a recording session. For example, an ArtistShare "Participant Offer" is similar to buying tickets to a live show, but in this case, fans are purchasing incrementally-priced packages offering a window into the artist's work-in-progress, pre-release privileges and in some cases credit on the final packaging or web page.

One form of customer conversation the artist uses at ArtistShare is radio. Web-based audio files run from a music player let's the artist share their thoughts on the ongoing project and provide other content unavailable to the public.

Now in its sixth year, ArtistShare artists have won three Grammy awards and 9 nominations. In 2004, Maria Schneider became the first artist to win a Grammy with an album distributed exclusively over the Internet. Distributed through ArtistShare she received four nominations for her album 'Concert in the Garden' and won Best Large Jazz Ensemble Album. Schneider's 2007 album, Sky Blue, is also up for a Grammy this year.

Other artists aboard the ArtistShare bandwagon include Trey Anastasio, Danilo Perez, Jim Hall and Kate Schutt.

BTW, Founder Camelio has a patent pending on the entire concept of artists monetizing the behind-the-scenes/creative process. Hey, wasn't Mozart doing this too Brian? Geez.


2. THE RISK-FREE RECORD LABEL: SELLABAND
(sellaband.com)

Started in late 2006 by a music-loving business major and two ex-Sony/BMG Europe execs, Sellaband allows fans (dubbed "Believers") to invest $10 each until the goal of $50,000 is reached. The band then gets to record an album with professional producers and studios. The 5000 believers fund the album recording and both parties earn money when it is released. At this moment, there are 6355 artists on SAB people have funded the recording of six albums. To date, over 6,000 bands have uploaded tracks to Sellaband, and $1.3 million has been invested in them, according to Pim Betist, one of the site's co-founders. 11 acts have hit the $50,000 threshold and created an album through Sellaband.

Sellaband artists are far-flung: So far Dutch nu-metallers Nemesea and Hawaiian singer-songwriter Cubworld reached the $50k mark, with four other artists about to enter the studio - Second Person from the UK, Clemence from France, Lily from the US and Maitreya from New Zealand. Not bad for being a little over a year and half old.

SAB CDs which have reached the necessary threshold are sold through partnerships with Amazon, and Amazon, the Orchard and Heinekin Netherlands will be sponsors of SAB's first concert tour in 2008. Amazon will also help more bands hit the magic $50,000 -- any band that reaches $30,000 will get an automatic $1,000 investment from Amazon to help them along.

Most users of the service have been pretty happy with the results. But it does seem that the bands who have gotten to the $50,000 goal did not just sit back and hope for fans. Right from the start they went out and found believers themselves. They tapped people who came to see them play live, people they met at parties and fans that had added them on their Myspace or Facebook pages. It it likely that all of the bands in the top 500 will have followed a similar plan.

The model is more than fair to the artist and believers (investors). Here's how it breaks down:

- Worldwide CD album profits - 50% to the artist, 50% shared between the believers.
- Ad revenue from the whole site - 1/3 to Sellaband, 1/3 to the artists who have recorded an album, and 1/3 to the believers of a recorded artist.
- After 12 months the artist gets complete ownership to the masters (thus if they want to sign with a label they can take their songs with them) and Sellaband only sells the songs for an additional 12 months.
- Each believer gets a limited edition CD for every part they invest.

By deferring the cost and talent of scouting to a crowd of music lovers, SellaBand puts powerful marketing and production tools into the hands of those with a personal interest in the music.


3. THE MUSIC STOCK MARKET: SLICE THE PIE
(slicethepie.com)

Similar in philosophy to Sellaband.com though more complex, Slice The Pie creates a marketplace for the trading, promoting, financing, and finding of new bands.

SlicethePie twists the standard online music store model by paying users for their musical acumen.  It has set itself up as a kind of financial intermediary. Users are paid a small amount for each review they write, based on how accurately each review reflects the community's taste.  In addition, users can invest in bands they think are going to make it, sharing in profits from album sales on the site.

Once registered, you can shuffle through the site's songs by clicking the Play Next Track link in the player, or browse by Genre.  When you hear a song that "has legs," as the saying goes, another link lets you add it to your watch list.  Then, if you want to invest in the band later, you'll be able to do so at a discount (details below).

According to SlicethePie, this "turns every music fan into a record label." The "Scout Room" allows people to review artist tracks. Scouts don't know the identity of the artist they're reviewing and rating. Reviews are multiplied, averaged out and the 20 best artists go on to the "Showcase". Since Scouts act as A&R, they earn about .10/review, and can earn up to .50/review (with each listen taking about 3 minutes). If an arist is "bought out" by a record label (which has already happened at Slicethepie with the band, Gillkicker), the Scouts and others involved will benefit from this transaction.

After three weeks, the winner of the Showcase is guaranteed about $30k. The people who invest get a free copy of the completed CD, backstage access, and some co-creation opportunities to become more deeply involved in the artist's work (though this is not required by the artist).

It's definitely a cool alternative to the regular route of impressing (and then being beholden to) a few head guys at a label. The great thing about all of these tools and online services is that it puts the power much more squarely in the hands of the artists and the fans. It becomes much more of a meritocracy.

Coming soon to Slicethepie: Facebook and other social networking applications (The Scout 'Community' setting up "fantasy leagues"; Trading Leagues (also a virtual trading league with cash prizes).

The common thread in all three services is that they're helping to finance artists by getting music fans to contribute. Sellaband is essentially an online record label that takes initial publishing rights with some other traditional restraints on the copyright during the first year. Fans (aka, 'Believers') take all the risk so it's a risk-free record label. But the downside it that the financial returns are potentially about ten times less than on Slicethepie. Sellaband is essentially an "advertising" model rather than a strict "revenue" model. Also, on Sellaband you get to see the bands and the bands' names which instills some emotional connection, whereas Slicethepie enforces a sort of neutrality at least on the way in.

Other crowdfunding services include CASHmusic.org (co-founded by former Throwing Muses frontwoman, Kristen Hersh), Fundable.com, and look for more at the "grand central station" of crowdfunding - Crowdfunding.com

Conclusion: Today's consumers are no longer passive recipients of brand messages. They've become active participants in co-creating the brands (and bands) they love. One more reason why you need to build community around your own product and service experience at your site. It's a worthwhile investment toward building customers, er, believers, who will be there for life.

Have you ever found a band (or several) you were convinced would become a success or even destined to be one of the most popular band on the planet if only other music fans knew they existed? Isn’t it always completely baffling when a band you love doesn’t catch on despite their outstanding talent, songwriting and live shows?

This happened to me many times during my tenure at Yep Roc Records while working with such a great artist roster. In 2004 we had a new release from a band called The Comas I was convinced would be one of the best selling indie rock releases of the year. The Comas are a very talented band and Conductor , based on singer Andy’s Herrod’s breakup with Dawson’s Creek star Michelle Williams , was a great release. Additionally, director Brent Bonacorso created an amazing full length video based on the album that was included as a DVD in the CD’s packaging.

I thought once we executed the publicity plan, music fans of the world would have a new favorite band and Conductor would be sitting at the top of the indie charts.

The label committed fully to this release with new media, publicity, radio promotions, and retail marketing to build awareness; plus, provided a tour support budget to get the band on the road. The band and release were embraced by the media, a few of the successes included:

• An 8 (out of 10) rating from indie tastemaker Pitchfork Media

• Named to Rolling Stone Magazine’s 2004 “Top 10 Bands You Haven’t Heard of"

• Magnet Magazine’s # 3 record of 2004

• Multiple songs added into the rotation at KEXP plus a featured interview and in studio performance

• Yahoo Music “One to Watch” selection that included an in studio performance and interview plus a full day feature on theYahoo.com homepage

Conductor sold just over 5000 total units despite strong media coverage and all the other things the band and release had going for them. The Comas moved to Vagrant Records for their next release in hopes of finding greater success. Unfortunately their 2007 release Spells sold even fewer units than Conductor.

How could a great band with a great release and full backing from their label and distributor not be more successful? The harsh reality of this business is that many bands simply don’t catch on with music fans or become a commercial success.

I have come to the realization over the years that there is some type of unseen “X” factor at work for bands that become successful. Some bands hit, some bands don’t and it’s not always clear why. Ask any experienced musician or industry professional and they will most likely tell you the same thing. I’ve taken to calling this “X” factor magic pixie dust since it’s not easily defined and quite elusive. Magic pixie dust isn’t available from a different publicist or found at the newest online music website to be sure.

How do you go about finding this magic pixie dust? No one knows for sure, but I’m of the opinion that it has to find you. The only way to put yourself in a position to be found is to work hard at your craft, play as many live shows as possible, build up your fan base and simply persevere through all the challenges you face every day as an artist pursuing your passion. You never know when a little magic pixie dust might come your way.

John P. Strohm is a transactional entertainment and intellectual property attorney with the firm Johnston Barton Proctor & Rose LLP . John’s practice focuses on the representation of musicians, songwriters and independent record labels. Prior to becoming an attorney, John was a professional musician and producer for over a decade. He performed and recorded as a member of several notable alternative pop/rock acts, including The Lemonheads and Blake Babies.

             I get a lot of calls from bands I’ve never heard of, and there’s a recurring conversation I’ve been having ever since I started practicing entertainment law.  It generally goes something like this:

Band dude: “I got your number [from a friend, from an industry resource, off the bathroom wall, etc.], and I want to talk to you about hiring you to be my lawyer.”

Me: “Great.  Why do you feel that you need a lawyer?” 

B.D.: “Because we’re getting our team together.” 

Me: “Well, that’s fantastic; but what exactly do you need a lawyer for?  Do you have a contract to negotiate/a dispute to resolve/ product to shop?” 

B.D.: “Right now we’re just getting my team together because big things are about to happen.  We have 30,000 MySpace friends, a tight set, and a great image.  We’re doing you a big favor, because I can feel it – we’re going to be huuuuuge.” 

            One of the most difficult aspects of working with musicians is managing expectations, which is especially true of young bands.  Pretty much every band believes they are going to be huge, which raises all sorts of issues – not the least of which is artists’ tendency to perceive any business opportunity as a potential “big break.”                 

  But what do they mean by the “team,” and when should a band or solo artist worry about assembling a team?  This article provides a quick introduction of the members of the typical business team (which should be distinguished from the creative team, e.g. producers, choreographers, lighting directors, makeup artists, etc.), along with some guidance regarding when these advisors may become necessary or desirable.   

              Attorney:  Please feel free to take this with a grain of salt: an attorney is often the first professional an artist will require to assist him with his career.  In my opinion, an artist should consult with a competent (i.e. knowledgeable about the music business) attorney whenever he is asked to sign a document with respect to his career or even to enter into a verbal agreement (which may be binding).  I’ve often been retained to get an artist out of a lousy agreement that the artist signed without the benefit of an attorney’s review.  You should regard signing any legal document with respect to your career without consulting an attorney as very risky.

              Other than reviewing legal documents and in the absence of a lawsuit or potential lawsuit, when does an artist need an attorney on his team?  First off, attorneys are by no means uniquely qualified to shop product to labels and publishers.  Historically, attorneys have played a big part in shopping deals for artists; however, their role has diminished in recent years.  These days labels are primarily interested in artists who have already done a great deal of work in terms of self-development; as such, even a fantastic demo tape will beg the question, What has the artist done to establish a career? 

  Rarely do labels actually sign artists who don’t have a sales history, a significant touring footprint, and/or a significant online presence.  If an attorney does shop an artist, generally the attorney will require a contingent fee, i.e. the artist must pay the attorney a percentage of their advance money, sometimes in addition to a percentage of gross income and/or hourly billing for certain services.  In short, it is generally far less expensive to find your own deal or have your manager (who gets paid a percentage regardless) shop for you.  If you bring an attorney a deal that’s already on the table, then you should be able to pay the attorney by the hour, rather than a percentage of the deal.  But beware: if you accept an informal offer of business terms (even delivered via email or MySpace), you might lose the opportunity to have your attorney negotiate the terms later. 

  In short, any successful artist must retain an attorney or attorneys to deal with the myriad legal issues that arise with regard to their many contractual relationships.  Less successful or newer artists generally only need an attorney when their business dealings expose them to risk, such as when they are faced with legally binding agreements, or for business planning purposes.  Such artists should generally retain attorneys as needed by the hour, as opposed to retaining attorneys who require payment of a percentage of the artist’s gross income. 

  Most music attorneys charge between $200 and $400 per hour, though some charge upwards of $500.00 per hour.  Keep in mind that many music attorneys are willing to negotiate flat fees or fee caps to work with a limited budget – though don’t be offended if an attorney requires a percentage of the projected fees as a retainer.    

  Personal Manager:  The personal manager is the artist’s principal advisor and agent with regard to both day-to-day and long-term matters relating to the artist’s career.  The personal manager (often referred to simply as the “manager”) generally acts as a conduit and communicator between the artist, the other team members, the record company and publisher, and all other parties involved in the artist’s career (including the creative team and parties providing specific services, such as publicists and licensing agents). 

  The personal manager generally commissions a percentage of the artist’s gross earnings – which can range from 10% on the very low end to 20% or more on the high end.  Established managers usually don’t get interested in artists until the artist has consistently shown the ability to earn income.  Management contracts often have rather long exclusive terms (generally measured in album cycles rather than years), and contracts generally entitle the manager to at least some income even after the term has expired. 

  When it makes sense for an artist to enter into an agreement with a personal manager should be analyzed on a case-by-case basis.  It’s almost never a good idea for an artist to enter into a long-term agreement with a less established personal manager without first determining whether the manager will be a good “fit” with the artist.  Many younger managers will work on a handshake basis for a period of time to allow the artist (and manager) to make an educated decision as to whether there is such a fit.  Most protections in management agreements benefit the manager, though there are usually some protections for the artist as well.  If a manager is not consistently generating enough of an increase in income to cover their commission, then they are probably not doing a good job (that is to say they are costing you money).

  Unlike lawyers, agents and (generally) business managers, personal managers are not required to be licensed.  As such, be aware that you should do plenty of research with respect to a prospective manager.  Researching a lawyer is far easier – you can simply call the state bar to confirm that the lawyer is in good standing.  With a manager, you should take the time to follow up with references.  If the manager won’t give you references, that should be regarded as a bad sign.

  Business Manager:  The business manager’s role is generally limited to managing an artist’s finances: including receiving income, paying bills, preparing tax returns, and general investment/financial planning.  If a business manager is not a CPA, you should probably regard that as a red flag. 

Business managers generally charge a fee in the amount of 5% of an artist’s gross income for their services.  An artist generally doesn’t need a business manager until he earns substantial income (i.e. six figures annually), and similarly good entertainment business managers generally aren’t interested in clients who are not earning substantial income.  Most services provided by business managers, such as tax preparation, can be obtained by accountants who will bill at an hourly rate.

Often personal management agreements require even newer artists to retain a business manager.  Such a requirement clearly benefits the personal manager, who wants to ensure payment of his commissions; however, it’s not always in the artist’s interest to give up an additional 5% of gross income to the business manager primarily for the manager’s benefit.  Assuming the artist has good money management skills and habits and delegates some important financial duties to an accountant, a music business manager sometimes constitutes an unnecessary expense, even for moderately successful artists.

Agent:  The role of the agent varies from one entertainment industry (e.g. film, literary publishing, television) to another (e.g. music).  Nevertheless, in every entertainment industry agents are subject to strict licensure requirements by statute in certain states such as New York and California.  The role of agents in the music industry is generally limited to booking live engagements, for which agents are generally paid 10% of the gross income generated by such engagements. 

           Unless your state does not have licensure laws and bookings will be limited to your state, it is important to confirm that a booking agent or agency is licensed in the relevant states.  Another important matter to keep in mind is that personal managers are prohibited from booking engagements in states with licensure requirements.  If managers violate state licensure laws and is sued by the artist, a possible remedy is that the management contract (regardless of the term) is void.

              It’s a buyer’s market for booking agents, because there are relatively few agents that have sufficient contacts and experience (and interest) to book less established acts.  As with other potential team members, agents rarely become interested in artists until the artist is able to generate significant income from live performances.  Most artists must book their own engagements until they establish a significant touring base, at which time agents are likely to pursue the artist.

              If your band becomes financially successful, it will probably become clear which of these advisors you need and when.  Keep an eye out for conflicts of interest among your advisors – especially lawyers and managers.  It’s probably a good idea to seek a lawyer referral from someone other than your manager, since the first order of business with your manager may be negotiating the terms of a management agreement.  Attorneys are bound by ethical rules that prohibit representing clients when such conflicts exist, but that doesn’t mean that all attorneys abide by the rules. 

              In sum, take your time and ask a lot of questions when forging professional relationships.  Although there is a documented history of dishonest or incompetent music industry professionals, I have met many solid, honest and respectable lawyers, managers, business managers and agents.  Make sure that you end up with good people that make sense for your unique needs and circumstances.

John Doe is the founder of the seminal Los Angeles punk group X, a solo artist and actor. John answers questions from our community members in the WWJDD? blog. Photo by Autumn de Wilde.

A Question from Scott in Maine

Hi John, First off I'm a huge fan of X, and your solo albums/CD's.
'Forever Hasn't Happened Yet' is a favorite.
Now, I'm a drummer and have only been included in songwriting
percentages on 2 or 3 occasions by generous and realistic, non
egocentric individuals. The rest of the time I'm told to forget it,
you're just the drummer. I feel the drums add a vital and even
essential part to most songs you hear on the radio, and beyond. Why
has the system been set up to not include drum parts ?
Realistically, the drums are almost always 'Written' by the drummer
with his past experiences that led him to a particular session/gig or
whatever. I have been playing most of my life, gigging and recording
for 25+ years. Now, again, I'm in a dilemma. I was verbally told I
would be cut in on publishing/songwriting for a debut CD, then after
recording is over, I'm out. We mutually parted but no mention of
previous verbal agreement. (with two members). They want to pay me a
small fee for the recording, and that's it. Any suggestions?

Sincerely,

Scott Mills

WWJDD?

Hey Scott,

Hmmmm . . . this is somewhat of a moral dilemma.
First, I would suggest that you write words, music & melodies; that way you would be assured your writing & publishing percentage. That's sort of the legal bottom line.
Many bands, early on, split writing & publishing money to keep all the band members afloat. When they're more established, the non-writing members forego their cut because the gig money, recording fund, whatever, is paying their bills. IF, you were told your contribution was important enough that you deserved a credit, then they should keep their word & you have every right to speak up & demand your share.
I'm quite certain that, legally, even if an instrument has the "hook" to a song; they are not considered a writer and do not share that credit or publishing. Unless the writer gives them a share. We all play our instruments & develop the song the best we can. That's why people get paid for recording sessions and if they're great players, the pay reflects that ability or creativity. But if there was no structure (melody, words & music) then there would be no song to contribute your part to. For instance, would Greg Leisz be considered a writer for playing his amazing pedal steel parts on kd lang records? There were X songs that I wrote entirely but included Exene as writer because she either edited or inspired the song. On the other hand if it's a "jam" that turns into a song, I would say that everyone playing that jam deserves a writers' credit & therefore publishing.

Hope this helps. thanks for writing & as always,

best of luck,
JD

If you have questions for John Doe about music, the music business or life feel free to email them to wwjdd@knowthemusicbiz.com.

For more information on John Doe check out theejohndoe.com or YepRoc.com .