Sellaband = innovative business model whereby fans can invest in their favourite band

Description

SellaBand [1] is a service for musicians and bands to promote their work in an effort to gain "believers" who will help to fund the production and distribution of an album. Believers must raise $50k in order to graduate the artists into contractual agreements. Believers can earn money back from ad revenue used in tandem with giving away the music for free online at sellaband's site.

Sellaband is the idea of the Dutch entrepreneur Pim Betist, and has been managed by Johan Vosmeijer, a former Sony BMG executive who left the industry to start something new.

On www.sellaband.com Artists and fans have one goal. Make music and profit together. Artists load up their music and profile. Fans look for Artists they like and believe in. With $10, they become Believers by buying a piece of an Artist’s future income on SellaBand. Once an Artist has reached the goal of $50,000, SellaBand uses this amount to record a CD. Then they provide the Artist with a high end studio, an experienced A&R manager and a top producer. After that they send the music in exclusive digipacks to the Believers.

Both Believers and Artist are now in business together. The music is given away for free on our website. The generated advertising revenues are being split evenly between the artist, the believers and SellaBand.

Another good explanation:

"The site basically gives you a MySpace type page to exhibit your mp3s, but instead of friends, you get ‘believers.’ These disciples of your rock scripture invest in your music at $10 increments until you’ve raised $50,000. Then, the magic happens at the studio, your faithful get a copy of your album, and the songs are posted online for free. For every download, you and your financiers, the original ‘believers,’ share in ad revenue. (More details here.)

By deferring the cost and talent of scouting to a large population of music lovers, SellaBand puts powerful marketing and production tools into the hands of those with a personal interest in the music. Potentially, this is a perfect service for bedroom musicians who think they have the next big thing but have no exposure. It’s one of several examples of Crowdfunding." (http://newassignment.net/blog/keith_axline/dec2006/06/music_makes_a_ca)

Detailed Profile

From Open Business (May 2007) at http://www.openbusiness.cc/2007/05/20/the-emergent-field-of-p2p-finance/

"Who: Sellaband is the idea of the Dutch entrepreneur Pim Betist, and has been managed by Johan Vosmeijer, a former Sony BMG executive.

Musicians: The money reaches bands indirectly: once $50,000 is raised, the funds are held in a Sellaband account, as a budget for the band to spend ‘as they like’. Sellaband has a stable of A&R reps, recording studios and CD pressing plants, which the musicians are encouraged to utilise.

Believers: Investing in bands allows fans the chance to ‘be in business’ with bands they like. The more tangible return is a special edition of the CD that is sent to all believers once produced. Additionally, believers share in a one-thirds split of the advertising revenues from the website. The amount received depends on the market share their band has on Sellaband’s download portal. In addition, believers will share 50% of the net profits from so-called ‘regular versions’ of CDs that are sold at gigs.

Once a year the totals are added up and any returns are deposited in the believers’ Sellaband account. Users can withdraw money from this account or use the funds to buy parts in other musicians.

Community: Believers can maintain a blog, upload photos and videos and post messages to network with other believers and artists. These community aspects are limited to users who have bought at least one part. Musicians have similar options, and it seems to be a prerequisite of success for bands to engage heavily with the Sellaband community.

Typical transaction: Each part costs $10, with additional transaction costs that are proportionately reduced the more parts a ‘believer’ purchases. Many believers just buy one part in various artists, but some invest heavily, with some believers buying over $5,000 in parts in artists like Nemesea and Clemence (two artists who have succeeded in raising $50,000).

Business model: The advertising revenues generated are split evenly between the artist, the believers and Sellaband. The publishing income of the songs that artists record with Sellaband are divided between the artist, Sellaband, producer and A&R manager, in the following way: Artist 60%, Sellaband 30%, Producer 5%, A&R manager 5%. Sellaband doesn’t touch any of the $50,000 that is given.

Sellaband is for-profit, and registered in Germany as a company. Due to the structure of the returns, it is not subject to financial regulations.

Establishing trust: Sellaband retains controls of the funds pledged by believers and provides these as a ‘budget’ for bands to use as they see fit, within certain parameters. A sense of participation that is more than purely financial is provided, as bands are expected to blog and engage with their believers. However, believers have no input into the recording of artists’ music, and have no say over the end result.

Performance: Four bands have succeeded in raising $50,000 and recording a CD since the site’s launch in August 2006. There are also over 15 bands that have raised over $10,000.

Problems or limitations: The mechanism for splitting profits from CD sales is somewhat ill-defined. This is probably because of the need to avoid legal regulations, but could create problems as the service scales.

Another criticism is that the structure of the site tends — at this point at least — to favour bands with a mainstream sound. This might change as Sellaband grows and is able to connect niche musicians with enough believers of like-minded tastes. But the constraints that Sellaband puts on bands, by offering rather generic industry tools, studios and producers, might not appeal to more experimental or innovative artists who want to do their own production or who are purely electronic musicians." (http://www.openbusiness.cc/2007/05/20/the-emergent-field-of-p2p-finance/)

Status Reports

2007

From Springwise:

"Fans have invested over USD 1,000,000 in the bands they believe in. The first band to raise USD 50,000 was Nemesea, which did so in 83 days. Six other bands have also raised 50K. Three of them—Nemesea, Cubworld and Second Person—have produced and launched their first album, and the other four are hard at work in the recording studio. In total, 4,806 artists signed up to SellaBand.

As pointed out by SellaBand's Music Director, Dagmar Heijmans: "Twelve months ago we didn't know if it would work. Well, we've proven that. People are willing to pay USD 10 (or more) to be part of an artist's success." For the coming year, SellaBand aims to make it easier for anyone to operate like a record executive, by giving them the tools to scout talent, track the recording process and promote 'the heck out of the artist' once an album has been released." (http://www.springwise.com/entertainment/bands_funded_by_their_fans_upd_1/)

2008

"the site has done very well in the last two years. Hundreds of bands have posted their music and profiles, and 25 have reached the $50,000 target. A few have even garnered mainstream attention. Success always spawns imitation, and today's Guardian notes that a few music biz veterans have launched a strikingly similar effort, called—aptly—Bandstocks." (http://crowdsourcing.typepad.com/cs/2008/08/sellaband-spawn.html)

Discussion

From Johan Vosmeijer, Managing Director SellaBand:

1. The money Believers put into their artists of choice is kept on a so called escrow-account. In case you don’t know what that means, there is a legally binding rule that we, as owners of the escrow account, cannot touch that money until a band has raised $50.000. In other words, we cannot turn this account into an investment fund, nor can we buy fancy cars from it or book nice trips to the Bahama’s. Yes, the interest will go to us, but that money will go straight back into the development of the website and the creation of an artist incentive program (useful tools for bands on their way to 50k).

2. Almost no band will ever raise 50k? Barely one month after our launch, one band is already over 10.000 (September 26th) in budget an counting. The big publicity wave on SellaBand is yet to come, but already 2,000 people have registered as Believers, and close to 3,500 Parts have been sold. Based on these figures we are very optimistic that in the (near) future, quite a few artists will be able to raise the money that is required to record with us.

3. Bands have free choice of producers and studio’s, as long as it fits into the budget. The only person that is ‘mandatory’ is the A&R person. He or she will be assigned by us and will then guide the artist through the recording budget. All of the money will be used for production, manufacturing and distribution, bands have the option to see the bills if they want to.