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Edited Text
Megan
Himel
Berklee
College
of
Music,
Valencia
Culminating
Experience
Outcome
Paper
Due
July
3,
2015
Crowdfunding
and
the
Music-‐Making
Paradigm:
A
Case
on
PledgeMusic
This
document
contains:
Abstract
Case
Study
Teaching
Note
MEGAN
HIMEL,
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Crowdfunding
and
the
Music-‐Making
Paraidgm:
A
Case
on
PledgeMusic
Abstract
and
Learning
Objectives
Megan
Himel
Title:
Crowdfunding
and
the
Music-‐Making
Paradigm:
A
Case
on
PledgeMusic
Author(s):
Megan
Himel
and
Alexandre
Perrin
Institution(s):
Berklee
College
of
Music,Valencia
Date:
TBD
Abstract
This
case
is
designed
for
an
undergraduate
or
master’s
level
class
in
music
business
exploring
business
models,
especially
in
the
realm
of
blue
ocean
strategies
in
value
proposition
and
revenues
streams.
It
is
ideal
for
considering
ethical
and
transparent
business
practices
within
a
notoriously
unethical
and
veiled
industry.
It
introduces
students
to
business
development
tools
such
as
SWOT
analysis,
while
empowering
them
to
understand
institutional
logic
and
its
role
in
ethical
and
transparent
business
practices.
Crowdfunding
is
a
new
tool
that
is
disrupting
the
process
of
funding
in
the
music
industry.
PledgeMusic
capitalizes
on
this,
while
breaking
into
the
third
frontier
of
the
music
industry
in
order
to
increase
sales
power
and
marketing
reach.
This
case
is
designed
to
study
how
PledgeMusic
is
participating
in
the
paradigm
shift
that
is
occuring
in
the
music
industry,
and
encourage
students
to
think
critically
and
creatively
about
how
to
stay
ahead
of
the
curve
as
a
leader
in
this
quickly-‐changing
market.
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HIMEL,
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OUTCOME
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Learning
objectives
The
learning
objectives
for
your
case,
up
to
five
at
250
characters
each,
should
be
provided
separately
below.
Clear,
concise
objectives
will
aid
users
in
selecting
the
most
suitable
case
for
their
teaching
requirements.
1. Analyze
PledgeMusic’s
value
proposition
to
both
artists
and
fans
2. Identify
and
understand
PledgeMusic’s
current
user
base
3. Understand
PledgeMusic’s
current
revenue
streams
4. Synthesize
a
SWOT
analysis
by
exploring
the
strengths,
weaknesses,
and
market
position
of
PledgeMusic
5. Make
a
recommendation
for
additional
business
activities
that
would
lead
to
new
revenue
streams.
a. Explain
the
recommendation
and
monetization
strategy
b. Explain
how
and
why
PledgeMusic
should
take
follow
the
recommendation
c. Identify
any
potential
obstacles,
as
well
as
strategies
for
overcoming
them
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Crowdfunding
and
the
Music-‐Making
Paraidgm:
A
Case
on
PledgeMusic
Case
Study
Megan
Himel
Introduction
Spring
is
always
a
magical
time
in
New
York
City.
The
tulips
were
blooming
on
Park
Avenue,
and
the
insanity
of
the
city
seamed
to
pause
for
a
moment
as
it
breathed
in
new
life
after
a
frigid
winter.
Though
the
city
was
in
a
rare
moment
of
calm,
Benji
Rogers’
mind
was
still
racing
with
questions.
His
company,
PledgeMusic,
was
in
its
sixth
year
and
doing
well.
With
offices
in
both
NYC
and
London,
their
work
reached
to
across
the
globe,
their
website
operating
in
5
languages
(PledgeMusic,
no
date).
Since
PledgeMusic
launched
in
2009,
they
had
successfully
blazed
a
trail
to
the
third
frontier
of
the
music
industry,
landing
Rogers
and
the
company
on
lists
such
as
The
Hospital
Club
100
(The
Guardian,
2013),
Billboard’s
“Five
Digital
Startups
to
Watch”
(Peoples,
2012)
and
the
Grammy
Music
Technology
Lab
(PledgeMusic,
2013).
But
what
next?
Obviously
it
was
prudent
to
do
one
thing
well
before
diversifying
to
other
areas,
but
when
the
time
came,
how
should
PledgeMusic
grow
its
activities
in
order
to
support
the
artist
and
disrupt
the
music
industry?
What
activities
were
connected
enough
to
their
current
activities
to
be
a
natural
move,
while
being
strong
enough
to
be
financially
sustainable
for
both
PledgeMusic
and
the
artist?
And
how
would
Rogers
know
when
the
time
was
right?
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The
Music
Industry
Landscape
Signing
a
deal
with
a
record
label
is
the
most
traditional
path
for
an
artist
to
take.
The
age-‐old
story
of
a
musician:
make
a
bit
of
music,
get
heard
by
someone
at
a
record
label,
get
signed,
and
grow
your
career
under
the
stewardship
of
a
company
that
knows
what
it’s
doing.
Record
labels
traditionally
employed
artist
and
repertoire
(A&R)
representatives
to
scout
for
talent;
when
they
found
a
diamond
in
the
rough,
they
would
polish
them
up
and
take
them
to
market.
Record
labels
invested
in
developing
talent,
funded
artists
through
the
creation
and
recording
process,
spearheaded
marketing
campaigns,
and
recouped
their
investments
through
the
sale
of
an
artists’
records.
Because
of
this
premise
of
investment
and
recoupment,
record
labels
typically
own
all
the
recordings
(masters)
produced
as
part
of
a
contract,
whether
or
not
they
are
ever
presented
to
market.
The
label
gets
to
choose
what
goes
to
market,
as
well
as
when
and
where.
In
addition,
the
label
keeps
most
of
the
money
earned
from
selling
or
using
the
master
–
artists
earns
10-‐15%
of
the
net
revenue
as
royalty
(20%
if
they
have
a
lot
of
bargaining
power)
–
and
they
only
see
that
cash
after
all
the
expenses
associated
with
their
advance
and
recording
/
marketing
costs
are
recouped
out
of
their
share.
For
decades,
this
model
was
considered
reasonable
because
the
record
label
assumed
all
of
the
financial
risk
and
invested
in
developing
the
artist
as
a
performer,
not
just
creating
masters.
And
there
was
risk
involved.
Fans
are
fickle,
and
artists
were
often
less
successful
than
predicted.
In
fact,
Cann
(2007,
101)
claims
that
“niney-‐five
percent
of
artists
don’t
recoup
their
advance,
so
the
royalties
on
offer
are
just
an
illusion.
The
advance
is
an
amount
of
money
designed
to
get
an
artist
into
debt
with
the
record
label
and
then
to
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keep
the
artist
working
for
the
label.”
Unrecouped
artists
never
see
cash
from
their
record
label
after
the
initial
advance.
Moving
forward
through
time,
recorded
music
earned
less
money.
As
a
result,
record
labels
tightened
their
purse
strings
in
order
to
remain
financially
viable.
Record
labels
began
expecting
higher
levels
of
performance,
experience,
and
preparation
from
an
artist
before
signing
them.
Sometimes
artists
were
required
to
have
an
album
ready
to
go
before
signing
a
record
deal.
While
record
sales
were
falling,
and
live
sales
were
increasing.
A
shift
was
occurring:
instead
of
tours
being
a
promotional
activity
for
recorded
music,
recording
music
was
becoming
promotional
material
for
tours
and
other
artist
activities.
In
response
to
this,
record
labels
began
asking
for
a
share
of
an
artist’s
other
revenue
streams,
arguing
that
those
revenue
streams
wouldn’t
exist
without
the
assistance
of
the
recording
to
garner
attention
as
a
marketing
tool.
This
new
contract
took
on
many
forms,
but
became
generally
referred
to
as
a
360°
deal.
As
a
result,
artists
got
significantly
less
out
of
a
record
deal
–
less
training,
assistance,
development,
and
support.
Despite
being
required
to
provide
more
on
their
own
and
labels
assuming
less
risk,
artists
began
to
owe
their
labels
a
greater
share
of
their
overall
income.
Running
parallel
to
this
growing
issue
was
the
fact
that
technology
was
developing.
Recording
equipment
was
becoming
more
affordable:
artists
could
rent
studio
space
on
their
own,
or
even
create
a
makeshift
studio
in
their
home.
Both
these
alternatives
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developed
momentum
as
part
of
a
DIY
(Do
It
Yourself)
movement,
empowered
by
services
such
as
CDbaby
and
The
Orchard.
Since
artists
were
recording
independently,
these
services
allowed
artists
to
distribute
their
music
without
the
assistance
of
a
record
label.
Artists
were
able
to
maintain
ownership
of
their
masters,
only
sacrificing
whatever
upfront
fees
or
commissions
commanded
by
their
distribution
service.
The
DIY
method
is
not
for
everyone
though.
Without
upfront
cash,
as
well
as
business
operation
and
marketing
experience,
artists
rarely
managed
to
achieve
the
same
reach
as
they
would
have
through
a
record
label.
Labels
have
teams
of
people
supporting
marketing
and
promotion,
and
those
teams
are
spread
across
the
globe,
allowing
for
much
more
reach
than
an
artist
typically
has
on
his
or
her
own.
In
addition
to
promotion
and
global
reach,
independent
funding
is
a
tricky
issue.
Does
an
artist
pay
out
of
pocket,
take
out
a
loan,
or
ask
someone
else
for
help?
Kickstarter
(a
crowdfunding
platform)
launched
in
2009
as
a
solution
to
this
struggle
across
several
industries.
Kickstarter
was
not
geared
toward
musicians,
but
many
took
advantage
of
it.
The
service
was
open
to
anyone
who
wanted
to
create
a
campaign
in
which
they
offered
rewards
(to
be
delivered
at
a
later
date)
in
exchange
for
money
immediately.
This
became
a
way
to
pre-‐sell
products
or
solicit
financial
capital
in
exchange
for
other
activities
(a
Skype
session,
dinner,
private
concert,
etc.).
The
most
popular
selling
price
for
an
item
on
Kickstarter
was
$25,
but
the
average
spend
per
pledger
per
campaign
was
$70.
There
was
no
barrier
to
entry,
making
it
an
appealing
choice
for
DIY
musicians.
Additionally,
Kickstarter
only
took
a
5%
commission
(compared
to
iTunes’
30%
on
any
money
raised
through
the
iTunes
store
or
a
record
labels
80-‐90%),
plus
any
credit
card
and
processing
fees
(ranging
from
3-‐5%).
Campaigns
on
Kickstarter
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have
an
overall
success
rate
of
37.72%;
music-‐specific
campaigns
enjoy
a
higher
success
rate
of
52.01%
(Kickstarter,
no
date).
The
Crowdfunding
Landscape
In
its
simplest
form,
crowdfunding
is
the
act
of
taking
an
item
directly
to
a
large
pool
of
consumers
(the
general
market)
by
way
of
the
internet,
rather
than
trying
to
pass
through
traditional
gatekeepers.
In
the
general
market,
examples
of
gatekeepers
are
angel
investors,
venture
capitalists,
and
large
corporations
that
buy
small
projects
for
individual
or
smaller
developers.
In
the
music
industry
the
most
commonly
noted
gatekeeper
is
the
record
label;
but
agents,
promoters,
distributing
entities,
and
even
shopkeepers
filter
out
whatever
they
do
not
deem
as
“good”
or
marketable.
Seth
Godin
(Cyber
PR,
2012)
explains
that
the
systems
of
modern
day
marketing
function
are
geared
toward
“normal,”
which
is
really
just
the
peak
of
a
bell
curve,
not
an
expression
of
what
everyone
is.
When
product
designers
and
marketers
started
gearing
products
(cars,
food,
music,
etc.)
toward
the
“normal”
population,
“weird”
became
something
negative
–
a
flaw.
Diversity
and
creativity
are
stifled
because
everything
has
to
be
reshaped
to
fit
into
the
mold
of
normal,
and
receive
approval
from
the
gatekeepers.
The
internet,
Godin
maintains,
gives
rise
to
the
opportunity
to
break
away
from
the
standards
of
“normal:”
The
Internet
does
two
things:
First,
it
lets
weird
people
find
other
weird
people,
which
amplifies
their
weirdness…
And
the
second
thing
it
does
is
it
lets
marketers
like
us,
anyone
who
makes
something
they
wanna
talk
about,
reach
groups
of
people
who
aren’t
the
normal
ones.
In
fact,
reaching
the
masses
is
too
expensive
now,
but
reaching
just
the
people
who
are
into
experimental
lesbian
fiction
–
that’s
easy
–
‘cause
you
can
find
those
people.
(Cyber
PR,
2012)
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The
internet,
therefore,
becomes
the
key
tool
for
bypassing
the
standard
of
“normal,”
and
the
traditional
gatekeepers
accompanying
those
standards,
in
order
to
reach
a
targeted
market
of
individuals
who
are
interested
in
the
specific
product
being
offered.
Crowdfunding
leverages
the
internet
to
empower
those
specific,
“weird,”
individuals
to
help
a
project
they
believe
in
come
to
life.
It
bypasses
all
of
the
traditional
gatekeeping
entities,
going
directly
to
the
consumer
for
funding.
Because
of
this,
crowdfunding
projects
in
the
music
industry
are
often
referred
to
as
direct-‐to-‐fan.
It
should
be
noted
that
a
close
relative
to
crowdfunding
is
crowdsourcing.
Crowdsourcing
shares
the
concept
of
going
directly
to
the
crowd,
but
asks
for
a
return
other
than
financial
capital
(such
as
ideas
or
services).
Examples
of
crowdfunding
platforms
include
Kickstarter,
Indiegogo,
and
GoFundMe
for
general
projects,
and
Patreon,
Sellaband,
ArtistShare,
and
MyMajorCompany
for
music/arts
specific
projects.
Crowdfunding
is
traditionally
broken
down
into
four
categories.
Each
operates
on
the
principle
of
going
directly
to
the
crowd,
but
each
offers
something
different
in
exchange
for
financial
capital.
The
attitudes
can
be
summarized
as
such:
1. Donation:
“give
money
to
this
project
as
an
act
of
generosity”
2. Rewards:
“give
me
money
now,
and
I’ll
give
you
a
product
later”
3. Equity:
“give
me
money
now,
and
you’ll
own
a
share
of
what
I
create”
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4. Lending:
“give
me
money
now,
and
I’ll
pay
you
back
at
an
agreed-‐upon
interest
rate
and
timeline”
Regardless
of
what
is
given
in
exchange
for
financial
capital,
all
crowdfunding
campaigns
typically
require
a
budget
and
target
amount
of
money
to
be
raised.
There
are
two
main
payout
systems:
1. All-‐or-‐nothing:
The
owner
of
the
project
sets
a
financial
goal,
and
is
unable
to
withdraw
any
money
until
the
goal
is
met.
2. Flex
(flexible):
Money
can
be
withdrawn
at
any
point
in
the
campaign,
and
is
kept
by
the
project
owner
regardless
of
whether
the
goal
is
met.
Traditionally,
crowdfunding
platforms
have
skirted
the
issue
of
copyright
in
several
ways
in
order
to
avoid
paying
royalties
and
mechanicals
to
collecting
societies.
Some
companies
do
not
host
content
on
their
own
servers,
while
others
build
a
release
or
waiver
into
their
service
contract.
The
most
common
method,
however,
is
to
strategically
place
the
digital
company
as
a
“service
provider”
as
defined
in
US
law
by
the
Digital
Millennium
Copyright
Act
in
1998.
Service
providers
are
defined
as
“an
entity
offering
the
transmission,
routing,
or
providing
of
connections
for
digital
online
communications,
between
or
among
points
specified
by
a
user,
of
material
of
the
user’s
choosing,
without
modification
to
the
content
of
the
material
as
sent
or
received,”
(U.S.
Copyright
Office,
1998).
Examples
of
service
providers
include:
drive,
dropbox,
wordpress,
Whatsapp,
and
bandzoogle.
Most
crowdfunding
platforms,
including
PledgeMusic
and
Kickstarter,
position
themselves
as
service
providers:
each
campaign
is
essentially
the
online
store
of
whoever
is
raising
funds,
making
that
person
responsible
for
any
copyright
or
payment
issues
at
play.
It
can
be
likened
to
being
a
property
owner:
if
the
landlord
rents
out
a
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property
to
serve
as
a
store,
the
renter
and
storeowner
is
responsible
for
all
costs
and
licenses
related
to
the
business
of
that
store,
not
the
landlord.
In
order
to
maintain
this
status,
however,
these
service
providers
must
uphold
strict
standards
and
earn
their
revenue
from
their
services
(hosting,
distribution,
consulting,
etc.),
rather
than
through
advertising
money
(the
way
YouTube
does).
History
of
PledgeMusic
and
the
Third
Frontier
At
the
age
of
34,
Benji
Rogers
was
living
on
an
air
mattress
in
his
mother’s
spare
room
and
doing
the
traditional
musician’s
struggle:
odd
jobs
and
bartending
in
London.
As
he
describes
it,
he
awoke
in
the
middle
of
the
night
with
a
realization
that
he
couldn’t
shake.
Rogers
recognized
that
an
artist
is
more
interesting
when
they’re
making
something
than
when
they’re
selling
it
after
the
fact.
Consider
the
appeal
of
VH1’s
“Behind
the
Music”
programs,
and
the
thrill
people
get
from
watching
reality
TV:
Look
at
the
success
of
reality
TV,
right?
You
don’t
know
what’s
gonna
happen,
it’s
happening
in
real
time,
it’s
moving
along.
Well
the
making
of
an
album
is
that
way:
it’s
got
all
those
elements.
It’s
uncertain,
you
don’t
know
the
outcome,
it
happens
only
once
and
in
real
time,
and
if
you
will,
it’s
almost
as
if
you
create
an
event
out
of
‘the
making
of.’
(Rogers,
2015)
If
the
appeal
of
reality
TV
could
be
applied
to
the
music
creation
process,
it
would
be
rewarding
(and
addictive)
for
fans.
Beyond
that,
Rogers
knew
that
a
particular
subset
of
his
fans
would
do
anything
for
him,
including
paying
a
premium
for
a
deeper
experience
than
the
traditional
album
and
t-‐shirt
sale.
This
group
of
fans,
referred
to
as
superfans,
make
up
17%
of
music
consumers
and
represent
61%
of
all
music
spending
(Mulligan
2015).
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What
if
there
was
a
way
for
an
artist
to
let
their
fans
pre-‐order
an
album,
unlock
access
to
a
special
video
stream
or
audio
stream
or
photo
stream
while
it’s
being
made,
only
for
them?
They
finance
the
record,
and
then
when
it
comes
out
you
sell
it
to
everybody
else…
and
that
same
superfan
will
still
buy
it
or
stream
it
once
it
comes
out.
(Rogers,
2015)
And
PledgeMusic
was
conceived.
PledgeMusic
unlocks
what
Rogers
refers
to
as
The
Third
Frontier:
If
the
first
frontier
was
the
selling
of
music,
the
second
frontier
was
the
selling
of
tickets,
the
third
frontier
is
the
making
of
those
things
that
you
will
then
sell.
And
the
fact
that
99%
of
releases
don’t
share
the
most
exciting
part
is…
it
keeps
me
awake
at
night.
(Rogers,
2015)
Of
course,
it
took
months
of
questions,
drama,
and
struggles
to
get
the
company
up
and
running,
and
there
was
a
lot
of
uncertainty.
There
were
legal
issues
left
and
right,
as
there
was
no
precedence
for
the
business
model
Rogers
was
proposing.
Rogers
wanted
to
go
directly
to
the
fan
far
in
advance
of
having
a
product
to
deliver.
This
would
allow
artists
to
bypass
gatekeepers
and
bureaucracy
(all
of
which
traditionally
take
a
cut
of
funds
earned)
and
create
their
albums
without
debt.
When
explaining
the
concept
of
fans
pledging
a
payment
amount
but
not
being
charged
until
enough
money
was
pledged
to
fund
the
project,
the
closest
parallel
he
could
make
was
in
the
hotel
industry:
you
can
book
a
hotel
in
advance,
but
you
are
charged
when
you
check
in.
Rogers
also
came
from
a
musician’s
background,
not
a
business
one.
He
had
a
huge
network
within
the
music
industry,
but
finding
the
right
team
of
business,
legal,
and
tech
was
crucial,
and
developing
a
business
model
to
pitch
to
investors
was
a
new
adventure
for
Rogers.
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Eventually,
Rogers
put
together
a
team,
secured
financial
capital,
and
dove
into
development.
PledgeMusic
hired
a
developer
in
February
2009,
and
launched
with
Rogers’
own
project
that
July,
two
months
after
Kickstarter.
It
was
a
phenomenal
success.
Within
five
days
Rogers
could
walk
into
the
studio
and
record,
completely
debt-‐free.
The
money
raised
already
covered
the
studio
and
additional
costs.
The
business
model
still
had
questions
though:
would
taking
a
15%
commission
on
all
funds
raised
be
enough
to
cover
all
their
expenses?
They
were
undercutting
iTunes
dramatically
while
providing
more
services
at
cost
to
themselves.
At
the
same
time,
PledgeMusic’s
commission
appeared
significantly
larger
than
Kickstarter’s;
what
if
that
gap
drove
potential
users
away?
Yes,
PledgeMusic
ate
the
credit
card
and
3rd
party
processing
fees
and
provided
hands-‐on
assistance
through
campaign
managers
for
each
project,
but
would
artists
consider
this
valuable
enough
for
the
extra
percentage
commission?
The
biggest
question:
could
fans
really
be
counted
on
to
engage,
or
was
Rogers’
project
just
a
fluke?
Over
time,
PledgeMusic’s
business
model
proved
to
be
sustainable:
15%
commission
kept
them
in
business,
and
fans
engaged
more
than
Rogers
could
have
hoped.
Instead
of
earning
an
average
spend
of
$10
per
fan
per
campaign
(the
cost
of
an
album),
the
average
spend
per
fan
per
campaign
fell
in
the
$54-‐$61
range,
depending
on
the
active
campaigns,
(Rogers,
2015);
as
of
2013,
the
average
pledger
spends
$1004
on
music
a
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year
(PledgeMusic
and
Nielsen,
2013).
Compare
this
to
the
other
consumers
in
the
music
industry,
who
spend
average
of
$68
per
year
on
music,
across
all
mediums
and
artists
(PledgeMusic
and
Nielsen,
2013),
and
it
is
clear
that
Rogers
was
right:
the
superfans
wanted
more
than
just
an
album,
and
were
willing
to
pay
for
it.
Of
those
who
use
PledgeMusic,
82%
of
their
spending
is
on
physical
products
(PledgeMusic
and
Nielsen,
2013).
The
majority
(51%)
is
spent
on
CDs,
followed
distantly
by
vinyl
(10.1%)
and
T-‐shirts
(9.43%).
Other
items
for
sale
include
credits
on
albums,
Skype
lessons,
and
handmade
artifacts
(PledgeMusic,
2015).
Over
the
past
6
years,
PledgeMusic
has
grown
rapidly.
Though
they
originally
launched
one
or
two
campaigns
a
month,
now
they
launch
between
four
and
six
campaigns
a
day.
In
the
past
few
years
(2011-‐2014)
PledgeMusic
has
experienced
an
average
37%
annual
increase
in
artists
who
have
launched
projects,
and
the
user
base
has
grown
at
an
average
rate
of
78%.
(PledgeMusic,
2015)
Despite
this
fast-‐paced
growth,
only
4%
of
all
music
consumers
are
early
adaptors
of
direct-‐to-‐fan
activities
such
as
PledgeMusic
and
its
peers
(Mulligan,
2015),
which
means
that
there
is
still
incredible
room
for
growth.
PledgeMusic’s
Differentiating
Factors
Artists
using
PledgeMusic
enjoy
a
90%
success
rate
(Herstand,
2014).
Much
of
this
can
be
credited
to
PledgeMusic’s
strategy
and
involvement
in
the
process.
Hands-‐On,
Artist-‐Centric
Approach
One
of
the
biggest
distinctions
PledgeMusic
has
is
its
hands-‐on
and
personal
assistance
when
it
comes
to
running
campaigns.
Every
artist
has
a
campaign
manager
within
the
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PledgeMusic
office;
Rogers
describes
the
team
as
“some
of
the
most
talented
people
you’ve
ever
come
across,”
(Rogers,
2015).
Campaign
managers
work
closely
with
the
artist
to
develop
they
types
of
products
that
will
be
listed
for
sale,
as
well
as
the
behind-‐
the-‐scenes
content
that
will
be
made
available
through
the
AccessPass.
Campaign
managers
counsel
artists
on
best
practices
overall
and
within
their
genre,
and
walk
with
them
through
the
entire
process.
Although
a
campaign
manager
is
highly
involved
in
the
process
–
everything
ultimately
falls
into
the
hands
of
the
artist.
A
campaign
on
PledgeMusic
is
a
relational
activity,
so
it
is
essential
that
anything
sold
or
shared
must
ring
true
to
who
the
artist
is.
This
means
that
the
artist
has
ultimate
creative
control,
rather
than
an
A&R
or
marketing
representative
from
PledgeMusic.
Campaign
managers
are
helpers
and
consultants,
not
the
final
word.
PledgeMusic’s
policy
is
not
to
launch
every
project
that
comes
to
them,
but
only
launch
campaigns
they
know
have
the
best
chances
of
success.
When
an
artist
comes
to
PledgeMusic,
they
share
their
financial
goals
and
timeline
with
their
campaign
manager.
These
are
weighed
against
an
artist’s
footprint
on
email,
Facebook,
Twitter,
YouTube,
and
other
social
media
platforms;
the
campaign
manager
then
makes
a
recommendation.
Artists
are
not
blatantly
turned
away,
but
they’ll
be
advised
if
their
goals
are
not
in
alignment
with
their
footprint.
From
there,
PledgeMusic
helps
and
artist
to
either
(a)
reevaluate
his/her
financial
goals,
or
(b)
run
a
promotion
aimed
at
increasing
the
artist’s
reach
(such
as
a
NoiseTrade
promotion).
The
goal
is
not
to
turn
artists
away,
but
rather
to
prepare
them
as
well
as
possible
for
success.
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Codifying
the
Fan
Experience
PledgeMusic
taps
into
the
reality
TV
experience
for
fans
while
giving
them
a
taste
of
what
happens
behind
the
scenes.
Although
PledgeMusic
doesn’t
require
a
specific
number
of
updates
from
artists,
the
standard
number
of
pledgers-‐only
updates
is
17
(Rogers,
2015).
There’s
an
ecosystem
at
play
in
PledgeMusic:
40%
of
transactions
come
from
within
PledgeMusic’s
own
user
base
(Rogers,
2015),
implying
that
fans
enjoy
the
experience
enough
to
use
PledgeMusic
as
a
discovery
platform
or
return
for
other
artists’
campaigns.
By
building
this
ecosystem
and
standardizing
the
way
content
is
distributed
to
superfans,
PledgeMusic
takes
some
of
the
uncertainty
out
of
marketing.
Artists
are
still
in
control
of
what
is
shared,
but
they
don’t
have
to
stress
about
the
how.
Syndication
Technology
and
Other
Outreach
PledgeMusic
strongly
believes
that
is
essential
as
a
tool
for
correspondence.
Fans
who
hand
over
their
address
want
information,
and
direct
emails
avoid
both
the
costly
“boost”
tool
on
and
the
transient
nature
of
Twitter.
Not
only
does
PledgeMusic
have
the
ability
to
inform
its
entire
community
of
users
about
new
campaigns
through
their
website
and
newsletter,
they
have
found
a
way
to
spread
the
word
through
pledgers’
own
social
networks,
allowing
awareness
of
an
artist’s
campaign
to
grow
exponentially:
When
a
fan
pre-‐orders
an
album,
they
unlock
access
to
that
special
part
of
the
site.
But
in
doing
so,
they
get
to
syndicate
all
of
the
artist’s
updates
to
their
own
personal
networks
without
pushing
a
button.
So
basically:
an
artist
does
a
video
from
the
studio,
I
as
the
pledger
can
auto-‐share
a
30-‐second
clip
of
that
video
to
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my
or
wall
without
pushing
a
button.
No
other
platform
has
that
piece.
(Rogers,
2015)
Increase
Marketing
Time
&
Reach
While
the
syndication
technology
uses
social
networks
to
increase
the
reach
of
a
campaign,
another
factor
is
at
play:
marketing
time.
Traditional
marketing
campaigns
in
the
record
business
begin
1-‐3
months
prior
to
release,
and
are
usually
dependent
on
a
finished
product.
Rarely
does
any
major
marketing
take
place
during
the
creative
process.
PledgeMusic
turns
the
creative
process
into
the
Third
Frontier
and
uses
it
as
marketing
time.
A
finished
product
is
not
required,
because
the
engaging
factor
of
the
marketing
comes
from
the
uncertainty
of
what
will
happen
next.
Running
a
campaign
on
PledgeMusic
can
triple
the
marketing
time.
And
since
a
wide
variety
of
items
are
available
to
purchase
at
several
price
points,
there
is
always
an
immediate
call
to
action
for
the
fan.
Using
this
technique,
artists
make
far
more
money
than
they
would
otherwise.
Data
“[PledgeMusic
is]
the
only
platform…
that
creates
a
community
for
superfans
that
the
artist
can
withdraw
from
when
they
leave.”
(Rogers,
2015)
Perhaps
more
valuable
than
the
hands-‐on
assistance
is
the
data
an
artist
receives.
Artists
not
only
know
exactly
what
was
sold
to
whom
and
where,
they
also
gain
any
of
the
relevant
contact
information
for
their
pledgers.
This
isn’t
just
a
like
or
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handle
–
it’s
direct
addresses,
contact
information,
and
user
information
that
the
pledger
has
chosen
to
share.
Artists
not
only
can
view
this
information,
but
can
also
take
it
with
them
when
they
finish
a
campaign
in
order
to
use
however
they
see
fit
outside
PledgeMusic.
Compared
to
other
companies,
this
is
a
goldmine.
iTunes,
for
example,
keeps
user
data
to
themselves,
as
does
Amazon.
Spotify
shares
broad
information,
but
passes
demographic
and
psychographic
data
on
to
labels,
not
artists.
None
of
these
companies
provide
a
way
for
artists
to
contact
their
fans
directly;
artists
are
forced
to
go
though
the
platform
in
order
to
communicate
to
fans
acquired
there.
This
is
a
problem
for
artists,
because
if
forces
dependency
on
these
platforms,
and
therefore
loyalty
based
on
cost
of
abandonment
rather
than
the
quality
of
the
platform
Even
keeps
contact
information
to
themselves
–
and
charges
artists
in
order
to
reach
their
audience
by
boosting
posts.
When
artists
use
these
points
of
purchase
and
dissemination,
they
are
giving
their
valuable
data
away,
while
the
companies
are
making
huge
profits
off
of
selling
the
data
at
a
premium.
PledgeMusic
believes
that
the
data
an
artist
generates
belongs
to
the
artist,
and
protects
it
as
such.
Should
an
external
entity
(such
as
a
label
or
brand)
request
information
on
an
artist
(which
happens
occasionally,
usually
in
order
to
inform
the
decision
of
signing
or
working
with
an
artist),
PledgeMusic
seeks
the
artist’s
approval
before
passing
it
along.
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Charity
Finally,
PledgeMusic
positions
itself
as
socially
aware
by
incorporating
a
charity
aspect.
Artists
have
the
option
of
donating
a
portion
of
their
campaign
earnings
to
a
charity
of
their
choice
(PledgeMusic,
no
date).
This
allows
an
artist
to
be
socially
responsible
and
philanthropic,
while
inviting
their
fans
join
them
in
a
cause
they
believe
in.
Assignment:
What’s
Next
for
PledgeMusic?
How
can
Rogers
grow
PledgeMusic
in
a
way
that
aligns
with
his
company’s
values
and
strengths?
Use
all
the
tools
at
your
disposal
as
well
as
your
understanding
of
both
music
and
crowdfunding
landscapes
to
make
a
recommendation
for
additional
business
activities.
Lay
out
a
plan
for
implementation
and
monetization,
including
potential
obstacles
and
ways
to
avoid
or
overcome
them.
Be
sure
to
consider
and
explain
how
your
recommendation
aligns
with
the
institutional
logic
and
current
activities.
Bibliography
Cann,
S.
(2007)
Building
a
Successful
21st-‐Century
Music
Career.
Thomson
Course
Technology
Cyber
PR
(2012)
What
Seth
Godin
Can
Teach
The
Music
Industry
-‐
Part
1.
Available
at:
https://www.youtube.com/watch?v=JXmcxuckvsA
Herstand,
A.
(2014)
PledgeMusic
Looks
To
Change
The
Future
Of
The
Album
Release.
Available
at:
http://www.digitalmusicnews.com/permalink/2014/01/30/pledgemusic
Kickstarter
(no
date)
Kickstarter
Stats
—
Kickstarter.
Available
at:
https://www.kickstarter.com/help/stats
(Accessed:
18
June
2015)
Mulligan,
M.
(2015)
Meeting
the
Needs
of
the
Always
On
Fan
Nielsen
(2013)
Turn
It
Up:
Music
Fans
Could
Spend
up
to
$2.6B
More
Annually.
Available
at:
http://www.nielsen.com/us/en/insights/news/2013/turn-‐it-‐up-‐-‐music-‐fans-‐could-‐
spend-‐up-‐to-‐-‐2-‐6b-‐more-‐annually.html
MEGAN
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38
Peoples,
G.
(2012)
Five
Digital
Startups
to
Watch
in
2013.
Available
at:
http://www.billboard.com/biz/articles/news/1483930/five-‐digital-‐startups-‐to-‐watch-‐
in-‐2013
PledgeMusic
(2013)
‘PledgeMusic
Wins
Grammy
Music
Technology
Lab’,
PledgeMusic
News,
27
February.
Available
at:
http://www.pledgemusic.com/blog/477-‐pledgemusic-‐
wins-‐grammy-‐music-‐technology-‐lab
PledgeMusic
(2015)
Data
Request
1
PledgeMusic
and
Nielsen
(2013)
‘The
Buyer
&
The
Beats:
The
Music
Fan
and
How
to
Reach
Them’,
PledgeMusic
(no
date)
Available
at:
http://www.pledgemusic.com/
PledgeMusic
(no
date)
Charities
on
PledgeMusic.
Available
at:
http://www.pledgemusic.com/charities
Rogers,
B.
(2015)
April
21
Music
Business
Seminar
21
April
Rogers,
B.
(2015)
‘Going
Direct-‐To-‐Fan
in
a
Streaming
World’,
PledgeMusic
News,
11
June.
Available
at:
http://www.pledgemusic.com/blog/going-‐direct-‐to-‐fan-‐in-‐a-‐
streaming-‐world
Rogers,
B.
(2015)
‘March
11
Skype
Interview’.
Interview
with
11
March
Rogers,
B.
(2015)
‘March
31
Skype
Interview’.
Interview
with
31
March
The
Guardian
(2013)
The
Hospital
Club
100
list
2013.
Available
at:
http://www.theguardian.com/culture-‐professionals-‐network/culture-‐professionals-‐
blog/2013/nov/19/hospital-‐club-‐100-‐list-‐2013#Music
U.S.
Copyright
Office
(1998)
Digital
Millennium
Copyright
Act
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Crowdfunding
and
the
Music-‐Making
Paradigm:
A
Case
on
PledgeMusic
Teaching
Note
Megan
Himel
Summary
of
the
Case
This
is
a
case
designed
for
the
early
stages
of
a
music
business
course,
with
a
focus
on
direct-‐to-‐fan
strategies
as
demonstrated
by
PledgeMusic.
Students
will
explore
the
fan
base
PledgeMusic
caters
to,
as
well
as
PledgeMusic’s
business
model
and
marketing
strategies.
Students
will
be
expected
to
position
this
innovative
startup
in
the
music
and
crowdfunding
landscapes,
recommend
next
steps
for
the
company’s
expanding
business
model,
and
strategize
how
to
implement
their
recommendation.
Opening
Thoughts
Regarding
PledgeMusic
PledgeMusic
is
commonly
regarded
as
a
crowdfunding
platform
for
musicians.
That,
however,
is
a
very
narrow
view.
PledgeMusic
is
a
sales
and
marketing
strategy
that
promotes
extended
fan
engagement
by
leveraging
crowdfunding
mentality
and
technology.
In
essence,
the
crowdfunding
element
is
merely
a
means
to
an
end:
capitalizing
on
what
Benji
Rogers
(Founder
and
President
of
PledgeMusic)
calls
the
“third
frontier.”
Teaching
Objectives
and
Target
Audience
This
case
is
appropriate
for
an
undergraduate
or
master’s
level
class
in
music
business
exploring
business
models,
especially
in
the
realm
of
blue
ocean
strategies
in
value
proposition
and
revenue
streams.
Additionally,
it
is
ideal
for
considering
ethical
and
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transparent
business
practices
within
a
notoriously
unethical
and
veiled
industry.
Ideally,
students
will
have
an
introductory
knowledge
of
the
music
industry,
including
the
different
options
artists
have
for
funding
and
marketing
their
albums.
This
case
is
intended
to
give
enough
information
about
PledgeMusic’s
defining
factors
for
students
to
position
PledgeMusic
within
the
landscape
of
options
for
artists.
Lesson
Objectives,
Topics,
and
Assessment
Overarching
Question:
How
does
a
company
reconcile
the
needs
of
an
artist
with
the
desires
of
a
fan
in
order
to
be
fair,
rewarding,
and
financially
sustainable
for
all
parties
involved?
Students
will:
1. Analyze
PledgeMusic’s
value
proposition
to
both
artists
and
fans
2. Identify
and
understand
PledgeMusic’s
current
user
base
3. Understand
PledgeMusic’s
current
revenue
streams
4. Synthesize
a
SWOT
analysis
by
exploring
the
strengths,
weaknesses,
and
market
position
of
PledgeMusic
5. Make
a
recommendation
for
additional
business
activities
that
would
lead
to
new
revenue
streams.
a. Explain
the
recommendation
and
monetization
strategy
b. Explain
how
and
why
PledgeMusic
should
take
follow
the
recommendation
c. Identify
any
potential
obstacles,
as
well
as
strategies
for
overcoming
them
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Topics
Addressed:
1. Institutional
Logic
2. Business
models
3. Two-‐sided
platform
4. Value
proposition
5. Competitive
Advantage
6. Revenue
streams
7. Crowdfunding
8. Blue
Ocean
9. Music
value
chain
Assessment:
Although
students
will
be
asked
to
identify
PledgeMusic’s
value
proposition,
revenue
streams,
and
SWOT,
these
are
tools
students
will
use
to
discover
and
defend
what
steps
PledgeMusic
should
take
next
and
make
the
appropriate
recommendation.
Students
will
be
assessed
by
way
of
either
a
written
report,
or
a
deck
and
presentation
(depending
on
teacher’s
preference).
Report
and/or
presentation
will:
1. Recommend
a
new
revenue
stream
for
PledgeMusic
2. Justify
the
appropriateness
of
this
revenue
stream
based
on
PledgeMusic’s
preexisting
activities
and
value
system,
as
well
as
the
outside
market
3. Outline
a
strategy,
including
monetization,
obstacles,
tools,
etc.
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Lesson
Plan
Lecture:
Who
Listens
to
Music?
(8-‐10
minutes)
To
understand
the
music
market,
we
first
need
to
examine
the
audience.
Modern
thought
process
examined
by
Nielsen
(2013)
divides
music
audiences
into
six
key
groups.
The
audience
categories
are
listed
here
in
order
of
spending
on
music,
from
greatest
to
least.
1. Aficionado
Fans,
also
know
as
superfans,
are
the
biggest
music
consumers.
Their
tastes
span
a
genres
and
time
periods,
and
they
are
constantly
listening
and
discovering.
According
to
Mark
Mulligan
(2015)’s
presentation
of
MIDiA
research
at
MIDEM,
superfans
make
up
17%
of
all
consumers,
and
represent
61%
of
all
music
spending.
This
is
the
market
PledgeMusic
focuses
on.
2. Digital
Fans
“consider
themselves
to
be
the
tune
trend
finders,
listen
to
music
through
social
networks
and
are
very
engaged,
but
they
tend
to
be
less
aware
of
indie
bands
and
the
ins
and
outs
of
the
music
industry.
Due
to
their
extensive
connectivity,
these
fans
enjoy
free
access
to
internet
radio
and
spend
less
than
aficionado
fans,”
(Nielsen
2013).
3. Big
Box
Fans
“identify
themselves
as
having
an
intense
relationship
with
music,
most
notably
the
pop
and
country
genres.
Big-‐box
fans
connect
with
music
that
they
hear
in
movies,
on
TV,
in
video
games
and
in
commercials.
They
tend
to
be
discount
shoppers
whose
music
and
other
purchase
decisions
are
heavily
influenced
by
discounts
or
deals,”
(Nielsen
2013).
4. Ambivalent
Music
Consumers
“are
not
particularly
engaged
with
music,
but
they
use
free
internet
radio
services
like
Pandora
to
get
content.
They
are
willing
to
pay
for
special
or
unique
content.
Ambivalent
consumers
like
pop,
contemporary
Christian,
and
adult
contemporary,
hip-‐hop/R&B
and
classical.
Ambivalent
music
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consumers
have
average
incomes
but
spend
less
on
entertainment
than
any
other
segment,”
(Nielsen
2013).
5. Occasional
Concert
Consumers
“attend
concerts
for
a
favorite
artist
or
band.
They
tend
to
listen
to
music
during
work
hours,
but
listen
significantly
less
at
home,”
(Nielsen
2013).
6. Background
Music
Consumers
“are
the
least
engaged
with
music
and
they
spend
less
money
on
entertainment
in
general,”
(Nielsen
2013).
The
final
three
categories
(Ambivalent
Music
Consumers,
Occasional
Concert
Consumers,
and
Background
Music
Consumers)
are
identified
by
Nielsen
(2013)
to
represent
60%
of
the
total
population,
and
account
for
25%
of
music
spending.
Video
(15
minutes)
Watch
“What
Set
Godin
Can
Teach
The
Music
Industry
–
Part
1”
Available
at:
https://www.youtube.com/watch?v=JXmcxuckvsA
Frame
the
Case
/
Class
Discussion
(15
minutes)
Write
the
overarching
question
on
the
board.
How
does
a
company
reconcile
the
needs
of
an
artist
with
the
desires
of
a
fan
in
order
to
be
fair,
rewarding,
and
financially
sustainable
for
all
parties
involved?
Open
up
for
discussion.
If
students
need
prompting,
use
the
following
questions
to
guide
their
thought
process:
•
What
do
fans
want?
•
What
do
fans
currently
pay
for?
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•
What
might
they
be
willing
to
pay
for?
•
How
do
we
know?
•
What
does
an
artist
have
of
value
apart
from
their
music?
•
What
ways
does
an
artist
have
of
monetizing
these?
•
Do
artists
monetize
these
things?
Do
they
want
to?
Why
or
why
not?
Students
Read
Case
Independently
(15-‐20
minutes)
Walk
Through
Case
as
a
Class
(25-‐35
minutes)
Value
Proposition
(5
minutes)
Create
two
columns
on
the
board,
labeled
“artist”
and
“fan.”
Ask
students
to
identify
the
activities
PledgeMusic
performs
that
are
valuable
to
the
different
categories.
See
sample
in
analysis
section.
Who
Uses
PledgeMusic?
(6
minutes)
Review
the
information
about
different
fan
types,
focusing
on
superfans.
Guide
students
to
discover
that
although
only
4%
of
the
total
music
consuming
population
engages
in
direct-‐to-‐fan
experiences,
that
number
is
more
powerful
than
we
initially
believe
due
to
the
fact
that
direct-‐to-‐fan
experiences
cater
to
the
superfan
(17%
of
the
music
consuming
population).
See
analysis
section
for
more
details.
Revenue
Model
(3
minutes)
Currently,
PledgeMusic’s
primary
revenue
stream
is
the
15%
commission
on
all
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sales
through
the
platform.
This
appears
larger
than
it
is,
because
PledgeMusic
pays
credit
card
and
third
party
fees
(3-‐5%
of
sales)
out
of
their
15%
commission.
Most
students
will
quickly
notice
the
15%
commission,
but
many
will
need
to
be
reminded
that
the
commission
lessens
their
revenue.
This
differs
from
Kickstarter,
where
the
fees
are
tacked
on
top
of
the
commission.
SWOT
Analysis
(15
minutes)
SWOT
stands
for
strengths,
weaknesses,
opportunities,
and
threats.
A
SWOT
analysis
organizes
this
information
in
a
2x2
grid.
•
Strengths
are
internal
elements
of
your
company
that
are
positive.
•
Weaknesses
are
internal
elements
of
your
company
that
are
not
doing
well,
or
are
preventing
your
company
from
performing
as
well
as
it
could.
•
Opportunities
look
outward
at
elements
that
could
be
leveraged
to
your
benefit.
•
Threats
are
outward
elements
that
may
impose
on
your
company.
You
cannot
control
them,
but
you
can
develop
plans
to
protect
yourself.
Explain
a
SWOT
analysis:
purpose,
value,
and
process
for
generating
(see
above).
Draw
the
chart
on
the
board
and
perform
a
SWOT
analysis
with
the
class
(sample
in
analysis
section).
If
students
struggle
to
fill
in
each
category,
the
following
guiding
questions
may
be
helpful:
•
What
do
we
already
know
works
well?
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•
What
ways
did
Rogers
struggle
when
creating
PledgeMusic?
•
What
ways
is
PledgeMusic
vulnerable?
•
What
does
PledgeMusic
depend
on
while
having
little
control
over?
•
What
tools
does
PledgeMusic
have
at
its
disposal
that
could
be
utilized
for
greater
effect?
•
What
do
we
know
about
PledgeMusic’s
target
market?
•
What
do
we
know
about
the
current
market
share
for
engagement
strategies
such
as
PledgeMusic?
•
Who
or
what
may
draw
business
away
from
PledgeMusic?
Release
Students
to
Generate
Recommendations
Students
will
be
assessed
by
way
of
either
a
written
report,
or
a
deck
and
presentation
(depending
on
teacher’s
preference).
Report
and/or
presentation
will:
1. Recommend
a
new
revenue
stream
for
PledgeMusic;
2. Justify
the
appropriateness
of
this
recommendation
based
on
PledgeMusic’s
preexisting
activities
and
institutional
logic,
as
well
as
an
understanding
of
PledgeMusic’s
place
in
the
music
industry
and
crowdfunding
landscapes;
3. Outline
a
strategy,
including
monetization,
obstacles,
tools,
etc.
This
assignment
may
be
completed
individually
or
in
small
teams
(2-‐4
students),
and
can
be
completed
either
at
home
or
during
the
class
session.
If
completed
during
class,
it
is
recommended
to
allot
60-‐90
minutes
for
this
task.
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Analysis
Solutions:
1. Value
Proposition:
Artist
Fan
• Data
• Insider
access
• Extended
marketing/sales
period
• Specialized
items
available
and
(sell
more
products
and
experiences)
multiple
price
points
• Syndication
technology
• “cool”
factor
of
being
the
first
to
find
and
share
among
peers
2. User
Base
PledgeMusic
caters
to
the
superfans.
According
to
Nielsen
(2013),
superfans,
also
know
as
aficionado
fans,
“are
connoisseurs
of
music.
They
love
music
from
a
variety
of
genres
and
periods.
They
tend
to
like
indie
music,
and
they’re
always
listening
and
discovering.
This
segment
is
willing
to
spend
on
all
formats
of
music,
including
artist
merchandise,
concerts
and
online
streaming
services.”
Mark
Mulligan’s
(2015)
research
indicates
that
superfans
make
up
17%
of
music
consumers,
and
account
for
61%
of
all
music
spending.
Mulligan’s
research
also
indicates
that
4%
of
all
music
consumers
are
engaged
in
newer
methods
of
fan
experiences,
such
as
PledgeMusic,
Patreon,
and
MyMajorCompany.
All
of
these
early
adopters
are
part
of
the
superfan
cohort.
4%
seems
small
until
compared
against
their
cohort
instead
of
the
entire
music
consuming
population.
4/17
=
23.5%
of
the
superfan
cohort
has
adopted
PledgeMusic
or
similar
engagement
platforms.
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E.M.
Rogers’
(2003)
theory
of
diffusion
divides
people
into
five
categories:
•
Innovators:
The
first
2.5%,
who
come
up
with
new
ideas.
•
Early
Adopters:
The
second
13.5%.
These
people
are
quick
to
jump
on
to
new
ideas,
and
are
comfortable
with
risk.
•
Early
Majority:
The
third
34%.
These
people
join
in
as
a
new
idea
or
technology
begins
to
gather
steam.
•
Late
Majority:
The
fourth
34%.
The
late
majority
wait
until
a
new
innovation
has
proven
itself
before
taking
part.
•
Laggards:
The
last
16%
to
adopt
new
innovations.
These
are
the
people
who
still
use
cassette
tapes.
Rogers
postulates
that
there
is
a
chasm
in
the
middle
of
the
early
adopters
range.
If
an
innovation
gains
enough
momentum
to
cross
the
chasm,
then
it
is
only
a
matter
of
time
before
it
diffuses
through
a
society.
However,
most
innovations
don’t
make
it
past
the
chasm.
Looking
at
the
entire
music
market,
it
is
easy
to
assume
that
PledgeMusic
is
on
unstable
ground
since
only
4%
of
music
consumers
engage
in
innovative
technologies
such
as
PledgeMusic
and
its
peers.
If
examined
in
the
context
of
the
superfan
cohort
(PledgeMusic’s
target
market),
the
numbers
tell
a
different
story.
23.5%
of
the
superfan
cohort
already
engages
this
way,
indicating
that
PledgeMusic
and
similar
direct-‐to-‐fan
experiences
have
leapt
across
the
chasm
and
sit
comfortably
in
the
early
majority.
It
is
only
a
matter
of
time
before
direct-‐to-‐fan
experiences
become
commonplace
in
the
superfan
community,
and
then
work
their
way
into
other
fan
groups.
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In
further
support
of
this,
PledgeMusic
has
experienced
an
average
of
78%
growth
in
their
user
base
annually
across
the
past
3
years.
This
indicates
that
the
user
base
will
continue
to
grow
at
a
healthy
rate
as
long
as
there
are
still
superfans
to
be
reached.
3. Revenue
Streams:
a. 15%
commission
on
all
sales
through
platform
b. Less
credit
card/third
party
fees
(3-‐5%)
4. SWOT:
Strengths
• Proof
of
concept:
fans
respond
to
the
model
• Strong
relationship
with
artists
• Codified
system
makes
the
process
easy
for
artists
• Excellent
campaign
managers
• Syndication
technology
• Charity
Weaknesses
• Run
by
a
musician,
not
a
businessman
(lack
of
experience)
• Dependent
on
artist-‐fan
rapport
• Manpower
required
for
hands-‐on
personal
assistance
• Personalization
makes
the
data
difficult
and
expensive
to
organize,
codify,
and
analyze
Opportunities
• Community
aspect
• Only
a
small
portion
of
the
potential
market
is
tapped
(<4%),
and
they
are
responding
brilliantly
• New
social
media
platforms
• Data
insights
(either
hire
a
data
expert
or
use
a
consulting
company)
• Partnering
with
other
companies
(labels,
brands,
etc.)
Threats
• DIY
artists
• Marketing
services
/
consultants
with
direct-‐to-‐fan
strategies
5. Recommendations
for
business
activities,
including
monetization,
strategy,
institutional
logic,
and
obstacles:
Currently,
PledgeMusic
monetizes
their
activities
by
taking
a
15%
commission
on
all
money
earned
through
campaigns.
Moving
forward,
they
are
exploring
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many
options,
including:
•
Ticketing
This
is
an
initiative
PledgeMusic
is
currently
(as
of
2015)
pursuing.
Their
first
project
was
ticketing
for
the
Swamp
Fox
Biker
Bash.
In
addition
to
selling
tickets,
apparel
was
available
on
the
campaign
page.
Unfortunately,
this
event
has
been
postponed
for
reasons
related
to
the
venue.
Ticketing
is
a
practical
next
step
for
PledgeMusic
because
they
are
able
to
presell
tickets,
merchandise,
food
&
beverage
vouchers,
and
even
VIP
experiences
far
in
advance.
The
marketing
value
would
be
equally
as
valuable
for
an
event
as
it
is
for
an
album
release
–
event
managers
could
share
teasers
of
artists
who
will
appear,
interviews,
and
other
behind
the
scenes
knowledge
as
part
of
the
AccessPass,
and
capitalize
on
PledgeMusic’s
syndication
technology.
This
type
of
presale
could
easily
operate
with
the
same
15%
commission
as
standard
campaigns.
•
Partnerships
with
Streaming
Services
PledgeMusic
has
a
strong
direct-‐to-‐fan
strategy,
so
it
is
only
logical
that
they
integrate
the
system
into
streaming
services.
This
is
an
excellent
partnership
because
streaming
services
are
able
to
cultivate
both
artist
and
fan
loyalty
without
paying
larger
royalty
shares
(and
perhaps
even
taking
a
commission
off
the
sales).
For
artists
and
PledgeMusic,
partnering
with
streaming
services
drives
more
awareness
and
sales,
all
while
directing
fans
to
a
point
of
purchase
which
allows
the
artist
access
to
all
their
data.
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•
Brand
partnerships
This
activity
can
take
two
forms:
(1)
intelligence
/
referrals
for
brands,
and
(2)
brands
matching
funding
for
artists.
In
the
first
model,
PledgeMusic
would
play
matchmaker
for
brands
that
are
interested
in
working
with
a
musical
artist.
PledgeMusic
could
weigh
interest
from
artists,
and
then
consult
sales
and
engagement
data
to
find
the
appropriate
audience,
demographic,
and
psychographic
overlaps.
It
would
require
a
larger
data
and
intelligence
team,
and
well
as
an
amendment
to
their
policy
on
how
they
use
the
data
that
goes
through
their
system.
This
could
be
monetized
through
a
flat
service
fee
to
the
brand,
or
a
commission
based
on
the
value
of
the
exchange
between
artist
and
brand.
In
the
second
model,
brands
could
support
artist
and
garner
attention
by
matching
contributions
to
campaigns
of
their
choosing.
Brands
can
be
directed
toward
artists
by
similar
methods
to
the
first
model,
but
participate
in
their
campaigns
and
AccessPass
material
instead
of
doing
an
outside
partnership.
Similar
to
the
first
model,
monetization
could
occur
as
either
a
flat
fee
or
a
commission.
•
Intelligence
for
labels
PledgeMusic
has
begun
this
process
on
an
informal
level
by
requesting
artists
to
share
data
at
the
specific
request
of
record
labels.
PledgeMusic
could
give
artists
and
“opt
in”
clause
to
share
fan
information
for
the
purposes
of
label
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intelligence.
This
way,
they
would
flip
the
model.
Instead
of
a
record
label
seeking
out
information
on
a
specific
act,
labels
could
go
to
PledgeMusic
as
a
first
level
of
A&R
talent
scouting.
PledgeMusic
would
be
able
to
recommend
acts
to
sign
based
on
fan
and
sales
metrics.
•
Pre-‐order
service
for
labels
PledgeMusic
has
found
a
way
to
hack
the
marketing
process
and
extend
it
by
a
factor
of
two
or
three.
By
functioning
as
a
pre-‐order
service
for
labels,
PledgeMusic
can
provide
that
service
for
a
separately
negotiated
fee.
Labels
can
use
this
to
de-‐risk
the
album
making
process:
they
sign
an
artist,
give
a
small
personal
advance,
and
then
run
a
PledgeMusic
campaign
to
fund
the
making
of
the
album.
MyMajorCompany
does
something
similar
with
their
internal
record
label,
but
PledgeMusic
can
serve
as
an
outsourced
tool
to
any
label
that
desires
these
services.
Labels
should
be
in
support
of
this
because
it
(1)
extends
their
marketing
period,
(2)
increases
their
overall
sales,
(3)
increases
their
reach
across
social
media
with
syndication
technology
and
PledgeMusic’s
own
user
base,
and
(4)
does
not
require
them
to
redesign
and
promote
their
direct-‐to-‐fan
systems
in
order
to
be
efficient
and
enjoyable
ecosystems.
•
Fulfillment
services
Right
now,
artists
are
responsible
for
fulfilling
all
the
sales
made
through
their
campaign.
For
either
a
percentage
fee
or
a
flat
rate
(per
item
or
per
set
of
items),
PledgeMusic
could
expand
into
fulfillment
of
some
of
the
items
for
sale.
The
basics
could
include
digital
downloads,
CD
and
vinyl
pressing,
T-‐
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shirt
and
poster
printing,
etc.
All
production
and
shipping
costs,
as
well
as
service
fees,
would
be
deducted
from
the
artist’s
account
prior
to
them
withdrawing
money,
making
accounting
even
easier
for
artists.
•
Social
media
consulting
/
management
PledgeMusic’s
campaign
managers
are
very
good
at
what
they
do.
Why
shouldn’t
an
artist
let
them
consult
or
run
various
social
media
accounts?
When
in
conjunction
with
a
PledgeMusic
campaign
it
is
the
obvious
choice,
and
can
be
priced
as
an
additional
percentage
of
campaign
earnings
(assuming
a
minimum
fee).
If
an
artist
enjoys
the
service,
they
can
continue
to
use
PledgeMusic
to
consult
or
manage
their
social
media
for
a
monthly
fee
dependent
on
amount
of
activity
artists
would
like
performed.
•
Referrals
This
is
one
of
the
most
challenging
possibilities,
because
it
is
difficult
to
regulate.
PledgeMusic
would
have
a
network
of
service
providers
(mainly
publishers,
but
also
other
services
such
as
graphic
designers,
producers,
etc.)
with
whom
they
could
connect
an
artist
in
need.
The
ideal
situation
would
have
PledgeMusic
receiving
a
commission
from
the
amount
of
money
changing
hands
or
earned
from
the
partnership.
In
reality,
this
is
hard
to
police,
and
PledgeMusic
would
probably
have
to
settle
on
a
flat
or
speculation-‐based
fee.
•
Subscription
tier
With
a
subscription
tier,
fans
would
pay
a
monthly
or
annual
rate
for
access
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to
a
set
number
of
AccessPass
content.
It
would
also
credit
them
with
a
budget
of
monthly
spending
specifically
for
PledgeMusic
campaigns.
This
is
ideal
for
PledgeMusic
for
two
reasons:
First,
a
subscription
tier
generates
a
returning
fan.
They
commit
their
money
to
activities
on
PledgeMusic
regardless
of
whether
or
not
they
actually
spend
it
/
take
advantage
of
what
is
offered
to
them.
These
fans
will
use
PledgeMusic
as
a
discovery
platform,
supporting
and
growing
the
ecosystem.
Second,
a
subscription
tier
requires
pre-‐payment.
Unlike
a
normal
campaign
where
a
pledger’s
card
isn’t
charged
until
the
artist
is
ready
to
withdraw,
PledgeMusic
holds
the
cash
that
a
subscriber
pays
upfront
until
it
is
dedicated
to
and
withdrawn
by
an
artist.
This
creates
a
negative
cash
conversion
cycle
for
PledgeMusic.
•
Radio
Service
PledgeMusic
has
been
building
a
recommendation
algorithm
that
Benji
Rogers
(2015)
describes
as
70%
more
accurate
than
a
human
recommendation.
Once
this
is
mastered
and
tested,
it
can
be
rolled
out
in
a
radio
service
that
users
subscribe
to.
Since
it
would
be
competing
against
a
plethora
of
streaming
radio
services,
the
recommendations
must
be
excellent,
and
exclusive
content
would
make
it
more
valuable.
If
the
radio
service
had
direct-‐to-‐fan
tools
built
in
(links
back
to
an
artist’s
campaign,
website,
or
local
ticketing
options),
it
has
the
potential
to
gain
artist
loyalty
and
fan
attention
while
generating
more
sales
and
marketing
value
than
we
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see
on
most
streaming
services
today.
Elements
to
Consider:
Organization
Spend
Per
Fan
Record
Label
$10
Kickstarter
$70
PledgeMusic
$54-‐$61
Share
Artist
Keeps
10-‐20%
of
net
revenue
90-‐92%
(less
the
cost
of
fullfillment
85%
(less
the
cost
of
fulfillment)
Success
Rate
Barrier
to
Entry
Support
Provided
5%
High
Significant
52.01%
Low
None
90%
Moderate
Significant
References
and
Suggested
Reading
References:
Cyber
PR
(2012)
What
Seth
Godin
Can
Teach
The
Music
Industry
-‐
Part
1.
Available
at:
https://www.youtube.com/watch?v=JXmcxuckvsA
Herstand,
A.
(2014)
PledgeMusic
Looks
To
Change
The
Future
Of
The
Album
Release.
Available
at:
http://www.digitalmusicnews.com/permalink/2014/01/30/pledgemusic
Kickstarter
(no
date)
Kickstarter
Stats
—
Kickstarter.
Available
at:
https://www.kickstarter.com/help/stats
(Accessed:
18
June
2015)
Kickstarter
(no
date)
Rewards
—
Kickstarter.
Available
at:
https://www.kickstarter.com/help/handbook/rewards
(Accessed:
25
June
2015)
Mulligan,
M.
(2015)
Meeting
the
Needs
of
the
Always
On
Fan
Nielsen
(2013)
Turn
It
Up:
Music
Fans
Could
Spend
up
to
$2.6B
More
Annually.
Available
at:
http://www.nielsen.com/us/en/insights/news/2013/turn-‐it-‐up-‐-‐music-‐fans-‐could-‐
spend-‐up-‐to-‐-‐2-‐6b-‐more-‐annually.html
Rogers,
B.
(2015)
April
21
Music
Business
Seminar
21
April
Rogers,
B.
(2015)
‘March
11
Skype
Interview’.
Interview
with
11
March,
Rogers,
B.
(2015)
‘March
31
Skype
Interview’.
Interview
with
31
March,
Rogers,
E.
(2003)
Diffusion
of
Innovations.
Fifth
Edition
edn.
United
States:
The
Free
Press
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Suggested
Reading:
Byrne,
D.
(2013)
How
Music
Works.
San
Francisco,
USA:
McSweeney’s
Publishing
Passman,
D.
S.
(2012)
All
You
Need
to
Know
About
the
Music
Business:
Eighth
Edition.
New
York:
Simon
&
Schuster
Feedback
At
this
point,
the
case
has
not
been
tested
on
student
groups.
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Media of
