Innovation and Culture Blog – “"Crowdfunding" record label declares bankruptcy"
“Crowdfunding” record label declares bankruptcy
February 24, 2010 — James Gannon
Mathew Ingram reported today on the demise of Dutch record label Sellaband. Although stories of recording studios struggling to pay their bills or going out of business are certainly not uncommon these days, what’s interesting about Sellaband is that this news comes less than two years after the label acquired $5 million in venture capital funding, and a few months after landing hip hop legends Public Enemy.
What set Sellaband apart from other labels was it’s “crowdfunding” business model where fans would pay to “sponsor” an artist’s upcoming album which Sellaband would only produce once the artist gathered $50,000 in sponsorship. In return, fans would get a copy of the album (if the artist reached the goal) and a share in the album’s revenues.
Here is what Public Enemy member Chuck D had to say about the model just three months ago:
Sellaband is the new frontier and will completely redefine the way the music business operates
Unfortunately, it did not turn out this way and Sellaband went through its VC funding in a manner not seen since the late-90s. This should, however, have come as no surprise to anyone paying attention to recent trends in music distribution experimentation.
What’s been consistently proven over and over again is that these “crowdfunding” models always fail to attract the critical mass necessary for a sustainable business. Radiohead found out a couple years ago that when you ask fans to “pay what they want”, what they want to pay is just a little over $2 for your album; definitely not sustainable unless you can keep funding new albums with profits from albums released under an established record label.
Trent Reznor also regretted going with the “pay what you want” model for music distribution:
I naively thought at that time that if you gave the public the choice of do the right thing or not, I thought people would actually do it. Five bucks for an album And I found that most people, no, they really don’t want to do that. I think I laughed about that and got shit-canned by everybody for whining about wanting to get paid for work that I did. The steps we’ve taken since then, I think, have gotten closer to something that approaches a business model. It doesn’t work for bands that nobody knows yet.
Like Radiohead, Reznor can at least afford such experiments in digital music distribution (thanks to their traditional labels). I don’t think the same can be said of all the investors, fans and artists who put time and money into Sellaband.
© Innovation and Culture 2010