Recently, I read an interesting article about the increased importance of crowdsourcing in the music industry, stating that this new approach of funding and distribution has become possible through significant changes in this sector during the last years. Building up on my previous post about the music industry, I want to explain the model of crowdsourcing and how it changes the value chain. As a part of the analysis, I want to include the discussion of some successful crowdsourcing platforms and their strategies.
Wikipedia describes crowdsourcing as an act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community through an open call. This concept has gained a lot of popularity in many areas such as the design of t-shirt or company logos.
Crowdsourcing in the music industry means that almost the entire value chain from writing a song to its distribution can be done with the help of the community. There are websites that focus their business model on specific areas like recording or talent scouting but also there exist platforms that offer almost the entire process.
For the following analysis, I want to refer to the value chain introduced in my previous post and discuss it step by step in the context of crowdsourcing.
Value chain of music industry
Content creation
Most artists enjoy the freedom of being able to write a song on their own without any external influence from e.g. the labels. On the other side there are artists that are looking for persons to jointly create a song. The main idea behind this collaboration is the search for inspiration by including elements from different cultures, instruments, genres, etc. Sites like jambassador.com or songwritingfever.com offer this service.
Talent scouting/Contract artist
There are a huge number of pages out there that offer artists to publish their songs for free. OurStage.com, Sellaband.com or thesixtyone.com are some of them. The quantity of songs published redefines the job of talent scouting. Instead of actively looking for new promising artists, the challenging task right now exists more in filtering and selective picking. The crowdsourcing approach allows users to choose their favorite artists through different voting or rating systems.
Financing and Production
Through crowdsourcing, singers are no more depend on record labels to get their album funded. They can publish their work on one of the crowdsourcing websites and if they convince the users, the have the chance to collect enough money to record their songs and enjoy more artistic freedom. OurStage hosts many competitions giving away cash and non-cash prizes. On Sellaband, artists have the chance to get their new album financed by the site’s users. Once, the required money is collected, the supporters in return receive the CD for free, as well as concert tickets, merchandizing material and dependent on the artist, sometimes a share of revenues.
Promotion
If a band manages to get the required funding they have already raised some awareness. The existence of a number of websites that offers them to publish their song for free is another great promotional tool. Furthermore, there is a lot of word to mouth promotion done by the supporters (financers) of the band. Social media plays an important role in raising awareness offering the artists a great platform to advertise themselves and their songs.
Distribution
The digitization of media offers the bands a great selection of sites to distribute their song. Next to websites like thesixtyone that focus on the entertainment experience but also offer to download songs for a small fee, there are a number of digital music online shops as iTunes, myspace music, amazonMP3, emusic, Nokia Music Store, etc. Amazon on Demand even allows interested customers to purchase songs on physical CDs. Costs only occur when the song is sold. Two interesting site in this area are cdbaby.com and tunecore.com, central publishing pages that facilitate the process of uploading the song to the different online music stores.
During my research I found an interesting graph that shows the revenue share of the label and the artist using the different distribution channels. These numbers show the advantage of crowdsourcing because once the financing is obtained the income per song sold is much lower. On the other side, in this context we have to mention that the number of songs sold probably will be much higher with support of a label since much more resources a spent in advertising and PR.
Conclusion
Crowdsourcing is a great tool for artists to fund their songs. Since listing the song on the platforms usually is for free, artists can try without any cost, and try as many times as they want. This new kind of financing makes them less dependent on the record labels and also established bands like Public Enemy have decided to fund their new projects with support of the crowd. Next to a huge number of digital platforms to promote the songs, this effort can be leveraged by the word to mouth promotion of the crowd. Furthermore, nowadays the songs can be distributed effectively without a record label behind.
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