Crowdfunding Prefab Sprout

I discussed recently the IceBreaker tax dodge way of funding releases, so it doesn’t seem unreasonable to have a look at alternative models which are less ethically questionable and see how they compare.

It’s worth observing that the IceBreaker model was great for artists. Why? Because it was in the scheme’s interest to make the deals look as big as possible by transferring large sums, but it was completely irrelevant whether they made money. That means that the sum passed over by the exploitation company as “production costs” was ridiculously generous in comparison with probable sales.

Let’s assume £300K was advanced, plus 50% of proceeds. If you consider that Paddy will sell somewhere in the region of 15-20,000 CDs or equivalent into the residual fanbase (this is what I’ve been told by people in the industry), you can see that the maximum revenue assuming £10 a CD is something in the region of £200K. A lot of that will be costs, but say half is profit, half goes to Paddy, the other half is split 50/50 with the investors, so the net proceeds to the investors on 15-20,000 units would be less than £25K, whereas Paddy would net £50k plus the £300k advance. It’s very difficult for an honest scheme to beat that. So anything else that comes along is going to look a bit thin in comparison. Or come close even to the £50K he’s rumoured to have cleared from having “The King of Rock’N’Roll” in the Boots ad.

So what other options are available? Well, leaving aside a hand-rolled subscription service, for example TMBGs “secret” fan club, the obvious choices are Kickstarter, Patreon, and PledgeMusic.

All of these systems use some sort of graded content model, so you can pick premium content and pay more, and typically you’re tempted up the slippery slope via exclusive deals. Usually the lowest tier is very inexpensive, designed to pick up “passing trade”, and is a digital download or similar. Then you run up through various packages with increasingly personalised content, vinyl packages, free artwork, sometimes including personal contact of some sort with the artists, maybe a house gig, right up to massively premium stuff which costs thousands.

The business model of the crowdfunding systems is always to take a cut of the gross sum raised. For PledgeMusic it’s 15% plus optional add-ons.

I guess one of the best known Kickstarters was Amanda Palmer, who managed to generate over a million dollars from hers, and produced a superb album – “Theatre is Evil”. Palmer is to my mind the ideal crowdfunding artist. She has a massive and very devoted following, who feel they have a personal relationship with her, and to some extent do: she cultivates her fanbase carefully and is very generous with her time. She is also a top notch songwriter, and probably one of the best live performers I have ever seen. And even her negatives – a touch of narcissism perhaps and an over-communicator, the kind of things that can grate a bit – are positives in a crowdfunding context because they create a strong sense of connection and a brand.  So the point here is that she is someone to look to for a best case scenario and sparky ideas about how to maximise potential for a mid level artist.

One obvious problem with Kickstarter though is you need to make a minimum threshold to unlock the funding, and that’s not guaranteed.

PledgeMusic is very similar, but more focused on music – Kickstarter is very general – and apart from the all or nothing Kickstarter model also offers a pre-ordering system for already funded projects also using the graded model already described. It can also help with fulfilment, i.e. getting stuff to people, or you can do it yourself.

And Patreon, which for me is a very interesting twist. In this case the fans pay the artist either a monthly fee, or promise a fee per “thing” that the artist produces. There is the same graded set of subscriptions; to again take Amanda Palmer as an example, she has offers from one dollar up to one thousand. She has 8000 odd total subscribers, and generates about 12 “things” a year, with a total of $36K per “thing”, so you can see this is potentially very lucrative for her.

You get substantially the same “thing” whatever the subscription, but those paying a grand get other perks. Now for me, the “things” she offers are often very slight indeed – single songs or old graphics she’s found on her PC – but if you’re paying a dollar you don’t mind, if you’re paying more you feel important for supporting her, if you’re paying a lot more you’re getting a personal relationship in with the deal. It’s all completely transparent, and although there are cynical ways you can look at it, I think cynicism is misplaced. If you don’t like what the higher tiers give you, pay the dollar or nothing at all.

But could crowdfunding work for Paddy? Well, leaving aside his stubborn reluctance to do PR on his own behalf, which would be a necessary part of any project, let’s construct an offer and we can see how it would look and estimate what it would bring in. For a Kickstarter or PledgeMusic, let’s say it’s for the release of a new album. You could imagine a structure like:

£7.50 – Digital download of the finished album as MP3 or FLAC on day of release; Digitised artwork; regular email updates by Paddy on the progress of the album. Bonus tracks and early mixes. (no limit)

£15 – All of that plus special edition physical CD. (no limit)

£35 – As £15 offer but with limited edition vinyl 180g vinyl LP (750 available)

£70 – As £35 but all physical items are signed by Paddy (250 available)

£250 – As £70 but including a one hour phone conversation with Paddy (15 available)

£1000 – Physical copies of everything, all signed, plus a visit in company with the other VIPs for dinner and conversation with Paddy in a hotel near Newcastle following a tour of Andromeda Heights studio. (5 available)

This isn’t so different in essence to the IceBreaker proposition in terms of deliverables and edition sizes, and even the meet and greets align if you imagine that a few journalists got to meet him in the North East and quite  a number of people had phone interviews. So it’s not unrealistic at all. So let’s see what he could expect to make.

I think you’d sell out the limited edition items, which brings in £52,500. The most lucrative is the unsigned vinyl LP package. The smallest earners are the two high cost packages, and these could easily be dropped, but they’re there as a sales tactic because having them there focuses attention higher up the list for the less stellar packages.

Assuming sales of 20,000 units of “standard product), let’s say half, 10,000, come through this package and half through general distribution sales. Probably most fans in the Sprout demographic of essentially affluent middle aged men would go for the physical product, so we’ll divide it 3333/6667 between download and CD. Total gross from the deal is therefore around £178k. less 15% or so to the package provider (£15 to £27k depending how close you get to the £178k projection). Probably you’d set a funding threshold around £100K.

Assuming the other 50% of sales via distribution channels at lower margins, total revenue on the project if all projected assumptions hold good would be just over £220K.  Take off cost of production and manufacture plus management company fees and fulfilment costs and you might get 30-40% of that as profit, so around £60-90K pre-tax.

This isn’t a rigorous costing, but it gives a rough indication. Bearing in mind this would account for a couple of years of work by Paddy, would impose a strict contractual deadline for production, and require a fair amount of time for traditional forms of promotion as well as the crowdfunding deals, it’s probably not particularly attractive to him. Particularly when you compare it to what he’s used to from Sony/CBS and IceBreaker. Plus it would be extremely embarrassing if it wasn’t funded. On the other hand, it’s a closed deal: once completed it’s done, no more obligations.

So let’s turn to Patreon. That’s very much more open ended, and the structure of the packages would probably be different. Let’s choose the format where you pay when a “thing” is produced without any obligation to how often that is and set up a structure.

£5 – digital download of “the thing”, whatever it might be, plus email newsletter

£15 – Adds special limited edition physical formats where appropriate. Surprise bonus content

£100 – Super Patron option. Includes unique highly limited content, opportunities to speak to Paddy, and a personal Christmas gift from him. Limited to 3.

You can see from the Amanda Palmer Patreon the sorts of things that could be offered, this is just a “for instance”.

The key difference is that a “thing” could be a single song rather than a finished object. You could imagine the eleventh “thing” being a collected edition of the previous 10 as a physical CD, something like that. Paddy probably wouldn’t get anything like 7000 subscribers, but he could probably get around 1000, so that would generate £5-7,500 per “thing” fairly easily. Plus if the system is used to generate albums, he would be likely to get sales of 15-20,000 units via a normal distribution deal.

So it starts looking quite an attractive option. He’s not obliged to produce anything, but anything he does produce will earn him good money without excessive effort for promotion. And it provides him with something he owns and can get further downstream benefit from.

Neither format is as good as IceBreaker, but that would be impossible anyway as it was an artificial construction.

I don’t for a moment think any of this is likely to happen – I’m resolutely downbeat about the possibility of any further albums because I don’t think a traditional label would provide sufficient funding to make it attractive, and I don’t think Paddy can be bothered whatever the deal. You could fantasise about Bella Union picking Paddy up for an album, but it would be very small scale.

But the crowdfunding route is viable, just about, and could be made to work. The Patreon model is the one I’d use personally, but PledgeMusic would be OK too.

I’d sign up for the £1000 option of course. Like a shot. Or the £100 Patreon. You can but dream.