Crowdfunding is Not an Experiment: Why Pledge Music Matters

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“We are Ben Folds Five… When we started in Chapel Hill, NC in 1994 it was the heyday of grunge music. It was all guitars and no harmonies. Many said we didn’t know what we were doing. They were right. And in 2012, we still don’t. But we’re not alone now. Because in 2012, nobody knows what they’re doing. Except for Steve Jobs and Amanda Palmer.”

This is how Ben Folds Five opened their crowdfunding campaign video on Pledge Music.

Besides being incredibly funny to anyone who follows musician crowdfunding, it’s also illuminating. Crowdfunding for musicians — particularly those who have had success releasing albums in the “traditional” way — is often thought of as an “experiment”.

But what’s really more experimental: taking a loan from a record label where 9 out of 10 artists fail to turn a profit, or asking 100 or 1,000 or 10,000 or 100,000 of your biggest fans to finance the record with hardly any risk?

Even though Kickstarter raises more money for artists than the National Endowment for the Arts, crowdfunding is still an experiment?

Crowdfunding is no longer an experiment. It’s a proven formula. We’re still figuring out some of the details, but the theory is correct: fans want to support artists directly in exchange for exclusive access to the band and their creative output. If anything, it’s this musician perception of crowdfunding as “experiment” that’s slowing adoption — the fans are screaming at the top of their lungs asking for it like a back catalog request at a live show.

Musicians: the future is bright and under your control. Put on your shades and deal with it.

Of course, musicians themselves aren’t solely responsible for failing to adapt. The market itself has been slow to respond to the specific needs that surround crowdfunding an album.

There are relatively few companies that understand crowdfunding is going to be the dominant way albums will be made in the future. Certainly, you have the meteoric rise of Kickstarter and Indiegogo, but they have broader missions to change the dynamic of funding creativity in general.

There are only two companies right now that are seriously and directly competing for album-specific crowdfunding. They are Sellaband and Pledge Music. It’s unfortunate that their potential is to some degree being drowned out by the juggernauts of crowdfunding (Kickstarter and Indiegogo) because what musicians truly need is a crowdfunding platform created just for them.

There certainly aren’t only two companies competing for a share of the direct-to-fan artist revenue stream. Topspin, Bandcamp, Soundcloud, Reverbnation, Bandzooglethe list goes on. The definition of “crowdfunding” could be made broad enough to include them. Here, I’m talking specifically about platforms that actually have people on staff to work with artists and their managers to produce album-specific financing campaigns.

I’m going to focus on Pledge Music because they share many basic features with Sellaband, but also have several major differentiators that I consider genius. Sellaband is the more established of the two platforms and I’m not trying to diss them, I’m just really excited about the potential behind Pledge Music’s particular approach.

Pledge Music is a managed music crowdfunding and retail marketing platform. The “managed” part? Pledge Music staff will actually set up and run your crowdfunding campaign, so it’s “white glove” service for musicians and their managers. They’re experts that will consult with your management and coordinate all efforts to minimize risk and ensure your fans are engaged and get exactly what they pay for. They’ve run the “experiment” of album crowdfunding enough to have established solid best practices for success, and have built the tools to facilitate that success.

You’ll pay a standard and reasonable 15% cut that includes all payment processing fees. With respect to its crowdfunding component, it’s analogous to what you know and love about Kickstarter or Indiegogo except for a few truly genius moves:

  • Crowdfunding campaigns don’t end until the album is funded.
  • The dollar (or euro) amount being raised is hidden from public. They only see what percentage of the album is funded so far.
  • 99% of musicians on the platform opt to give a small portion of the funds raised to the charity of their choice.
  • Musicians are encouraged to market to their fans through the platform with exclusive content as part of the value offering.
  • When the crowdfunding campaign ends, a pre-sale window begins.

That last move is critical. When you think about it, there’s a blurry line between crowdfunding and a pre-sale. Most of the difference seems to be whether or not you have financing on the outset. So it makes perfect sense to start a pre-sale immediately after receiving financing. It’s one of those “why didin’t I think of that” strokes of genius that I see as the beating heart of Pledge Music’s common sense approach.

It’s the kind of sense that makes dollars. According to Pledge Music CEO Benji Rogers, my band left $1,661 on the table with when we recently raised $4,356 on Kickstarter.

That’s because Rogers has research showing 37% of the money raised by Pledge Music album campaigns comes in after the crowdfunding period ended. Ouch. That could have gone a long way.

See, on Kickstarter or Indiegogo, you build tons of buzz in the closing moments of your campaign to push toward and beyond your goal. Our goal was $3,666, which we hit about ten days before our campaign ended. We were able to push another $700 past that by pulling out all the promotional stops.

A few weeks later, we put the album up for pre-sale. We figured we wouldn’t get much interest because most of the fans that wanted it already got it through Kickstarter. But every day our inbox would pop up with new Bandcamp messages saying someone had pre-ordered the album. We saw the names and realized these weren’t old fans, these were new fans we’d attracted while doing all the crowdfunding promotion.

The secret to Kickstarter and Indiegogo is that they capitalize on one simple fact: true fans want more. They want the full brunt of your creative force. That’s why they’re patronizing your work. They want your creativity maximized, they want to have a hand in exposing others to what they love about your work. They don’t just want your music, they want your original lyric sheets, the shirt you wore on tour, and the bucket you puked in when you got off stage. Exclusivity is the new scarcity now that access to music is ubiquitous.

The average fan on Kickstarter contributed $39 to our campaign, as opposed to $5 for our pay-what-you-want pre-order on Bandcamp. If we turn out to have at least 42 people pre-order our album, as we’re on track to do, that actually works out to $1,661 we theoretically left on the table, because those people would have potentially purchased a reward package at a higher dollar amount had they taken part in the crowdfunding campaign.

There’s another, less obvious but very important reason to go with Pledge Music, and this applies to both small acts like mine, and the more widely known acts that seem to be Pledge’s bread and butter. It has to do with a very smart decision they made: The amount of money you’re trying to raise is never displayed in dollar amount. Users see what percentage of the goal was reached so far.

There’s this sort of inherent fear in setting your Kickstarter goal because the penalty of not reaching it is total failure. Since you also have to be 100% transparent on the amount, you’re compelled to set as low a number as you can get away with so your fan’s don’t think you’re overreaching. For example, we set our goal lower than we wanted to be safe and ended up unable to afford to hire a PR agent as we had originally planned. And there were still cost overruns in many of the rewards, some of which we’d planned for, some of which we hadn’t. On a larger scale this could have been disaster and is a fairly common complaint with Kickstarter. (Indiegogo is even more prone to this, because it rewards projects that fail to reach their goal, but takes a higher cut.)

Not only does Pledge Music have the expertise to help you avoid these problems, but their attitude is much more conducive to success: “Set the budget you need to do what you need to do, and you will get there eventually, just keep at it”. On Pledge, our band would have set our original budgeted goal of $6,000. We cut it down to $3,666 because that was our educated guess on how much we could realistically raise in 60 days, and we weren’t too far off. But it felt like the final round in the Price is Right.

Would it have taken longer than 60 days? Yes. Was there something about the deadline and the consequences that drove us and our fans to reach our goal? Yes. Obviously, it’s a big reason Kickstarter chooses to take its approach.

But here’s what it really boils down to: Behind every successful album on any platform — be it digital crowdfunding or just selling CDs out of the back of a car — is a successful manager. Kickstarter works because its platform that has features that enable the average artist to self-manage, whereas Pledge Music is built more as a tool that their campaign managers, along with the artist’s management, can use to engage the fans of the artist they represent.

You can read the case study on how our crowdfunding campaign succeeded, but basically, it was proper management and passionate promotion. I’m sure Pledge Music’s campaign managers can corroborate the amount of time and effort it takes to keep fans engaged is not to be underestimated. If I were scaling the crowdfunding campaign into five or six figures like most artists on Pledge Music, outsourcing management would quickly become mandatory.

The big lesson we’ve learned from watching projects fail on Kickstarter is that over-promising and under-delivering is a major risk. I’m reminded of many stories of indie bands that unexpectedly sold out of records or CDs and didn’t have the liquidity or production resources to keep the supply of recordings moving to fans. This is just a 21st century version of that problem.

So how to we convince musicians to embrace crowdfunding as the status quo for making albums? Education is a big part of it. With this blog and my online course, I’ve been doing everything I can to spread the word.

Ultimately, musicians will have to run the “experiment” themselves to see that it’s the most equitable financing solution for both musician and fan, potentially more lucrative than any record real if managed correctly, and much more rewarding from a basic human and artistic standpoint.

It will take companies like Pledge Music to convince musicians and their managers that crowdfunding is where music is headed. They’re going to need to better differentiate themselves from the Kickstarters and Indiegogos that dominate the market, while offering a user experience that is engaging for both fans and musicians. These are the areas that Pledge Music is weakest in. It’s not really standing out from the crowd in a marketing sense, and much of that has to do with a user experience that fails to be as innovating as the ideas behind it. Competing with Kickstarter is no small task, but I think Pledge Music has the potential to carve its own lucrative niche in the direct-to-fan artist revenue stream with the right leadership.

Kickstarter for Bands: How We Raised $4,300+ from 112 People

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My band just raised $4,356 from 112 people in 60 days on Kickstarter to release our new album Pandemic.

I’ve been espousing the virtues of crowd funding for a while now, so I’m really glad we didn’t blow our goal of $3,666. Instead, we went $690 over our goal.

There were a few strategy/marketing moves that really worked, and a few unexpected but important issues that arose during the process. I’d like to share them here with my fellow musicians.

This isn’t about how to make a great video or a great campaign — I’m assuming your campaign is already totally awesome and your album rules. I’m here to give you the war stories so you don’t repeat the same mistakes and make real money with these Kickstarter best practices for crowd funding an album.

Why We Picked Kickstarter

The first big choice is Kickstarter vs. Indiegogo vs. Pledge Music vs. Sellaband vs. Patronism. The last three were either overkill or still in beta. For most bands, the choice is going to be between Kickstarter and Indiegogo.

Kickstarter is the most established, fully-featured and polished of all the platforms. The only reason to consider Indiegogo is because unlike Kickstarter, you keep whatever money you raise even if you don’t reach your goal. You will pay a 9% fee instead of a 5% fee for this honor. When we weren’t 100% confident in our goal, we lowered it until we were. Indiegogo is perfectly fine (and charges the same 5% fee if you reach your goal), but we went with the established player. Remember, many of your backers will be funding their first project and will have to sign up with Kickstarter, so it pays to go with a trusted name.

Why We Set 60 Days to Achieve our Goal Instead of 30 as Kickstarter Recommends

I’m not going to dispute Kickstarter’s assertion that 30 days is the optimum length of a campaign — I’m sure their statistics clearly show it. But for us, 60 days was the right length. I think that for bands just getting their footing with marketing and sales, it’s better to have a longer window to utilize — think of it as a challenge to keep your audience’s engagement for a continuous two months. It’s hard to do, you will make mistakes, there will be lulls… but it’s a fantastic learning experience. If you’re not in any particular rush, more time will allow you to draw in more people from outside your fan base.

Delays to Watch Out for at the Beginning

Don’t expect to have your campaign up and running the day you decide to launch it… or, for that matter, anytime that week. Unless you’ve done a campaign before, you’re going to wait 2-ish weeks for Amazon Payments and your bank to work things out to where you can accept payments. You’ll need to provide tax info — oh yeah, you’re getting taxed on this income. You really ought to have an LLC and a business checking account, but you can squeak through DBA yourself with your personal account.

You may also be delayed if any of your campaign rewards (or any other piece of data) triggers Kickstarter’s moderators to flag your submission for violating the terms of service. That’s not limited to penises in the promo video and human blood as a $100 incentive. Our campaign was stalled because our top backer package offered free admission for life to any of our band’s gigs. Apparently, lifetime rewards are not allowed. There are dozens of “small print” rules like this. For us, it was an easy fix, but it’s important to be aware your launch can be delayed a couple days if it’s not up to spec.

Remember Shipping, Taxes, Fees and Declines when Budgeting

Setting your goal is all about figuring out how much money you are 100% confident you can raise, and then creating a budget to produce the album that matches that amount. When you do this, don’t neglect to factor in additional expenses that will have a significant impact on the money that’s left over to produce the record.

  • Shipping – Shipping gets expensive quickly and is highly variable based on where the recipients live. You’ve really got to budget for shipping, and for that you have to guess how many of each package you’re likely to ship. Take your guesstimated total and round it up to be safe.
  • Taxes – If your band has an LLC or a partnership, your company will be liable for the taxes. Otherwise, the person who handles the money will be on the hook. Like shipping, taxes are difficult for the average citizen to estimate, but you should be building in some room for cost overruns in your budget, and setting aside some money for taxes alongside.
  • Fees – Kickstarter will take 5% of total funds raised, and Amazon will take ~3% for processing the payments (less or more depending on how much you raised). This quickly adds up to hundreds and even thousands of dollars in fees — you will wish you worked at Kickstarter when you see what they take out. Factor the fees into the budget!
  • Declines – Backers’ cards are charged when the campaign ends. Depending on how broke your fans are, you may get a number of declined credit cards. Kickstarter tries to get the cash by sending alerts to the backer every day for seven days after the campaign. Then they give up, and the money is gone. Everyone’s going to have one or two declines, but some may have more. You’ve got a real problem when someone backs you to the tune of hundreds or thousands, and then their card declines, but there’s nothing you can do about that except try to build a relationship with that backer outside Kickstarter before the campaign ends (which is a good idea anyway).

In our case, all of the above added up to roughly 1/4 of our total production budget, so pay very close attention to fees and charges that may not be apparent at the outset.

By the way, we were worried about how long it would take to get paid after the campaign ended because we saw some people saying it took them up to two weeks. It took two business days for the cash to hit the Amazon account, and another day to transfer to our bank account.

The Hustle

A great video, a bunch of great packages, a great album… these are all… great. But they are nothing without the hustle.

Put briefly, we made a list of around 300 people we thought would back us at some level. We also had our 600+ Facebook fans and 300+ Twitter fans as a captive audience, and we hit them up every day. But as the deadline grew closer, we ran our 300-person list like we were doing a fundraising run against terminal illnesses.

Preaching to the choir is not everything — you absolutely have to be drawing in people from outside your fan base. Around 30% of our backers were total strangers to us before the campaign. We constantly were meeting new people on Twitter and pitching the album, and that was good for a few hundred bucks. Ditto on reaching out to the Creative Commons folks, who gave us a spot on their curated Kickstarter page┬ábecause we license all our music CC-BY-NC-SA.

So get out there, meet new people, and get them to back your dream.

Top 3 Reasons Musicians are Scared of Crowd Funding and Why They Should Get Over It

Crowd funding is so huge now that the U.S. Securities and Exchange Commission is subjecting the hot fundraising trend to a serious regulatory review (and yes, you should probably be worried — but you already knew that.)

We’re talking about sites like Kickstarter, PledgeMusic and IndieGogo — places where creative entrepreneurs can tap the power of the Internet crowd to pay for their projects and businesses. By collecting small amounts amounts of money from a large group in exchange for perks, these platforms aggregate the finances of the many to serve a specific financial goal set by the creator.

For musicians, there is another crowd funding option available, what I would call “exclusive subscription platforms.” These include Sellaband, Artistshare and Patronism. Here you can charge fans a regular subscription fee, and they get access to exclusive, behind-the-scenes content delivered by you on a regular basis. It’s likely we’ll see the two models continue to converge in the next few years, perhaps until they are indistinguishable.

For musicians, this should be an exciting time. Musician Amanda Palmer just raised $1.2 million dollars on Kickstarter. Maybe you’re not the hyper-talented, super-creative, digital media whiz she is. Maybe you have a fan base of hundreds rather than thousands. The truth is you only need a few dozen fans to raise a few thousand dollars in a matter of months. I’ve seen it happen with some regularity.

Unfortunately, I’ve heard from plenty of musicians that don’t crowd fund for a number of reasons — even a few who did the whole thing, raised their goal money, and still hated the experience. Granted, it’s is not for everyone. But it’s here to stay and will only grow in time. More importantly, crowd funding is not based on exploiting musicians yet raises significant chunks of cash for us, and therefore deserves our support as a business model. In a way, crowd funding is the new patronage. Therefore, I would highly recommend that musicians start getting used to the following three scary things, and overcome for the sake of their ability to make money playing music.

Scary Crowd Funding Thing #1 – We can’t beg our fans for money.

At first I was surprised that this was the top reason musicians were scared to get into crowd funding. Then I remembered that most musicians are allergic to business and understandably would feel conflicted. But as I’ve pointed out before, until a manager comes along, you are your own manager. And you’re just not managing a business if you’re not taking advantage of the hottest revenue stream to happen to musicians in a long time.

There are easy ways to get around you having to physically appear on camera asking your supporters for money. You can simply use text and images to communicate the goal of your fundraising project. Or find someone peripheral or unrelated to the project to ask for you. If you object to the concept on philosophical grounds, I can respect that. But realize that if you have a merch table, you’re already asking your fans for money. Crowd funding is not analogous to begging — they will understand you’re just asking for their support, and they won’t feel obligated if they don’t want to give it. It’s certainly less awkward than asking fans to go to iTunes and pay Apple a fee to access to your music.

Scary Crowd Funding Thing #2 – I don’t know what to provide as incentives.

This is super-easy to solve. Something I encourage all musicians embarking on crowd funding is to do some research on their platform of choice and compare platforms to find the best fit for you. Take a look at similar musicians with similar funding goals in similar genres. Check out their incentives, and see what’s perks are hot and what’s getting ignored. This should give you a really good idea of what incentives will work for you. Setting these up can be the most fun part! Actually creating them and shipping them to all your backers can be a nightmare though, so don’t bite off more than you can chew. The goal here is not to sell merch pre-orders, but to raise money well over the cost to produce the perks. The other thing to remember is that some perks don’t involve an outlay of cash. In fact, the sweat-equity perks like commissioned songs, autographs and original artwork are some of the most premium and well-paid for.

Scary Crowd Funding Thing #3 – What if I set my fundraising goals too high or too low?

Many bands I talk to simply aren’t confident they can raise the amount they’d really like, so they settle on something super-conservative, reasoning that any overage is icing on the cake. Too often, however, they are leaving hundreds or thousands of dollars on the table. Remember there is a flurry of backing action in the closing days of a drive that’s close to reaching its goal. If it’s already met ahead of time, money will continue to trickle in, but not the way it would have if you were a grand or so away from crossing the finish line.

Some bands seize on this and choose to beef up their asking amounts, holding in reserve a grand or so of their own money to artificially increase their asking amount by the same figure they hold in reserve. This way, they can pump cash into their project at the last minute if they fail to generate last-minute support they sought and still make their goal. At the same time, you don’t want to blow the whole thing and ask for more than you can realistically raise, or have to rely on more of your own money than you bargained for to meet your goal.

Again, figuring out how much to ask for isn’t as tough as you might think. You can probably write a short list of the people you feel would give you at least $100 on the spot for a set of cool perks. It’ll include super fans you know by name, as well as friends, family and colleagues you think you can get significant support from. You can also easily estimate how many fans would shell out $20 for a modest perk. Dividing your total Facebook following by ten is a good place to start, but use your intuition and your knowledge of your fan base’s past purchase behavior. Finally, as in step #2, carefully research what comparable bands are asking for in relation to comparable projects and perks.

This should give you a ballpark of what to ask for. You could round this number down to the nearest thousand to be safe. You could add a grand if you feel like you’ll be expanding your fan base during the crowd funding drive. But you won’t get any money without asking, so it’s best to just set a number and see how it goes. Get out there and start crowd funding — and don’t forget that once you start, you’ll have a lot of hard work promoting your funding drive ahead of you. That hard work, however, will pay off nicely if you truly rise to the challenge.