Friday, 30 January 2009

Now I'm a Believer ...

New ideas needed to cope with the global economic downturn? How about investing in talent? Sellaband and Slicethepie are financial platforms that provide fans with the option to invest in a new artist or band. These platforms enable music fans to take on an A&R role, spotting new talent and, potentially, to earn money by reviewing music tracks and providing start-up financing for their favourite tunes.

On the Dutch SellaBand site fans can support artists with as little as $10 and with this qualify as a 'Believer' in the artist. An artist has to raise $50,000 in order to record a professional album. Believers are entitled to a share in the revenues made with the album they helped to create - 50% of net revenues generated from the music recorded with SellaBand are split among the Believers of this artist, for a period of five years. Apparently already 29 artists from 12 countries have raised the full $50,000 on SellaBand and over $2,200,000 has been invested in unsigned artists.

Slicethepie, registered in London, allows artists who get the best online reviews from fans to enter into an online showcase. They have to raise a minimum of £15,000 in order to get professional album of their performances recorded. Fans can invest as little as £1 in an artist to receive free tracks and exclusive artist access. An investment of £5 or more entitles to a free digital copy of the album and the fan's name secured on the album sleeve. In addition, the fan gets the exclusive right to purchase a number of 'contracts' (a tradeable bet on the number of albums and tracks sold over a two year period from release) in respect of the artist, with one contract for every £1 invested entitling them to a return of 10 pence for every 1,000 albums/10,000 singles sold (contracts are redeemable after 2 years). These contracts can be also traded on Slicethepie's trading exchange (see here for further details)

This blog has previously reported on the collaboration of Groove Armada with Bacardi. See also The Times news report "Musicians and performers invite fans to invest in their success".

1 comment:

Ian McClure said...

This model is revolutionary, yet so simple!

The apparent short-term success of this business model confirms a lot of my own premonitions about the upside potential in using IP as an instrument for shareholder investing. Fundamentally, IP acts like an annuity for investment purposes with future royalty streams posing as stock dividends and corporate distributions. Investing in copyrights, before they are even created, combines considerable risk with the opportunity for great profitability. When you throw music into the equation, you have a candidate for investment that fan-vestors can actually believe in (and understand!). The very fact that Sellaband calls its fan-vestors “Believers” once they donate should explain why this model is so lucrative. This is just another example of the incredible business and investment prospects provided by the dynamic flexibility of intellectual property. The opportunity to detach creator from rights-owner, or the free transferability of intellectual property, lends itself to utilization as an investment vehicle.

This is just the tip of the iceberg when it comes to this business model, especially in the intellectual property context. The newly coined term, “user innovation”, has been the driving force behind business models used at companies like Threadless, where the customer is actually the company. As seen with Threadless, Sellaband, and Slicethepie, equity in IP does not have to be divided ex-post. IP auctions and proposed IP stock markets are lending transparency to a platform in which investors can throw money at IP once it is brought to market, but the idea of using royalty streams and future returns on IP as an instrument for raising capital ex-ante is novel, and genius. Behold, the flexibility and adaptability of IP!

In IP’s future as a tradeable asset class . . . I am a “believer”.

- Ian McClure, attorney at Wyatt, Tarrant, & Combs, LLP and author of IP Prospective (www.ipprospective.com)