Crowd Funding: a New Industry Collaborative

Crowd funding is a term used to describe a collective of people coming to together to combine their finances and resources to fund projects initiated by others. With websites like Kickstarter becoming widely popular, not to mention fan sites and artists/filmmaker web pages, fans are now able to invest in the creative future of their beloved artists on a more personal level.  Instead of supporting creative content after its creation, fans can directly encourage artists to pursue their talents by providing the resources necessary for the artist to practice his or her craft.

Traditionally, artists receive an advance by record labels, using those proceeds to fund their musical endeavors and paying other necessary expenses throughout the recording process.  Since the record labels invest in the artists’ craft, the artists provide the music that labels sell to consumers.  Often times the record labels make the definitive decision as to which songs get released.  Artists would then create the music that would sell and meet the conditions of the record labels in order to fulfill the terms of their recording agreements, and to try to make enough money through royalties to pay off their advances, break even and make a profit.

With crowd funding, fans are giving artists the ability to make music without relaying on record labels.  In turn, artists are able to indulge in creative avenues that are not always available or allowable under the discretion of record labels.  In the end, the artists are happy to make the music that they really wanted to make, and fans are happy to receive the music they wanted to hear, right?

For many, this scenario is true.  However, crowd funding creates unique issues that are new to the music industry.  As with every aspect of music 2.0, crowd funding has created a set of challenges that artists must consider.

Crowd funding raises a question of intellectual property interests on several levels.  A big question arises when an artist promotes the idea in which he or she seeks to create in order to generate funding.  For example, a solo jazz singer may describe the theme of the proposed album, complete with the ideas she or he has for individual songs.  Although this information is often helpful in allowing prospective investors to determine whether they should pool their resources to help the aspiring musician, the musician’s idea may look enticing to another aspiring artist who is able to produce the end product quicker.  Since copyright protection is not extended to ideas, artists must think carefully as to what information they provide to potential crowd funders.

Crowd funding also raises the issue of who owns an interest in the end product.  Most crowd funding websites make a profit by taking a portion of the money raised, without wanting more from the persons seeking funding.  However, artists should check the “Terms of Use” and other site rules, regulations and information to see whether they are granting any intellectual property rights to the site hosting the crowd funding drive.

Artists must also be clear with potential investors as to what they will get out of donating resources.  Many projects offer “thank yous” in liner notes, deluxe copies of the album, advance copies, etc.  Without paying attention to what the artists offers to the potential investors, artists could inadvertently seclude fans, give away intellectual property rights or fail to present an appealing project to people who would otherwise fund the project.

The level of interactivity between the artist and investor can also harbor stronger fan relationships.  Most people who donate resources through crowd funding projects do so because they believe in the artist.   The investor is more than a passive listener and wants to feel as if he or she is a part of the creative process.  If the artist seeks resources other than those of financial sorts, the artist and the investor need to make clear what exactly they seek out of the arrangement, and should retain advice as to the legal implications that may arise.

Regardless of what type of investment the artist receives, artists are given the opportunity to forge a closer relationship with their investing fans.  Artists can provide the investing fans with regular updates of the recording process, give a “behind the scenes” look into the creative process; artists can make the fans feel special by giving them early previews or early access to the finished product; etc., etc., etc.

Crowd funding is a great resource, but, as with everything new, it also forces artists and fans to consider new challenges.  It has the potential to develop stronger fan bases, to allow for better music production, to harbor greater creativity, and to further redefine the music industry.


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