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Validating new business model for a label company .. help me

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Validating new business model for a label company .. help me

Postby femuc » Wed Feb 14, 2018 9:26 am

hey guys,
im currently evaluating a new/different business model for a label company and I need your support and opinion.

first of all my knowledge in the music industry is not that good, so please bare with me and support me.

the idea is to start a label company that uses fan base to select talents through fans financial support.

this means, my label company will have a platform where talents can make profiles and try to market themselves. our team will boost market some exceptional talents. and not fans will look through the profiles and find talents which they love, trust and wanna invest on.

lets say fans financed one talent, then the label company will use the money to make an album and portion of the album profit goes back the shareholders(fans) who financed the album and the rest goes to the singer, publisher, ...

the problem I see in the music industry is that label companies are in charge to make a decision whether this or that talent is worth adopting and they always think if the risk involved since if the talent turns out to be a bust then they loose a lot of money. what I am doing is reducing this risk by making the decision in the hands of the fans and not the label company. if the fans are gonna invest their money, then they will make sure that they choose the best talents out there.

this way, the label company operation is paid for in advance and all the revenues are pure profits.

tell me what do you guys think. what am I missing. is this even a problem im solving.

thanks a lot.
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Re: Validating new business model for a label company .. help me

Postby Hugh Robjohns » Wed Feb 14, 2018 10:01 am

It's a good scam er… scheme (sorry)… :lol:

I'll be interested to read the views of others...

H
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Re: Validating new business model for a label company .. help me

Postby ken long » Wed Feb 14, 2018 10:14 am

femuc wrote:hey guys,
im currently evaluating a new/different business model for a label company and I need your support and opinion.

first of all my knowledge in the music industry is not that good, so please bare with me and support me.

Alarm bells.

the idea is to start a label company that uses fan base to select talents through fans financial support.

So, like Q crates.

this means, my label company will have a platform where talents can make profiles and try to market themselves. our team will boost market some exceptional talents. and not fans will look through the profiles and find talents which they love, trust and wanna invest on.

...aaaand let me guess... thsi platform is Twitter / Facebook / Instagram

lets say fans financed one talent, then the label company will use the money to make an album and portion of the album profit goes back the shareholders(fans) who financed the album and the rest goes to the singer, publisher, ...

So yes. Very much like Q crates.

the problem I see in the music industry is that label companies are in charge to make a decision whether this or that talent is worth adopting and they always think if the risk involved since if the talent turns out to be a bust then they loose a lot of money. what I am doing is reducing this risk by making the decision in the hands of the fans and not the label company. if the fans are gonna invest their money, then they will make sure that they choose the best talents out there.

It's up to the labels to take risks. That's what they do. Losses incurred from one dud artist are hopefully recouped ten fold with the star artist.

this way, the label company operation is paid for in advance and all the revenues are pure profits.

You can do this with pre-orders anyway.

tell me what do you guys think. what am I missing. is this even a problem im solving.

Should work.
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Re: Validating new business model for a label company .. help me

Postby femuc » Wed Feb 14, 2018 10:49 am

this means, my label company will have a platform where talents can make profiles and try to market themselves. our team will boost market some exceptional talents. and not fans will look through the profiles and find talents which they love, trust and wanna invest on.

...aaaand let me guess... thsi platform is Twitter / Facebook / Instagram

you are right, but this would then be a focused platform on this target group

lets say fans financed one talent, then the label company will use the money to make an album and portion of the album profit goes back the shareholders(fans) who financed the album and the rest goes to the singer, publisher, ...

So yes. Very much like Q crates.

I like how you broke down my article !! what is Q crates? can you share more info? links?
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Re: Validating new business model for a label company .. help me

Postby ken long » Wed Feb 14, 2018 12:08 pm

femuc wrote:
this means, my label company will have a platform where talents can make profiles and try to market themselves. our team will boost market some exceptional talents. and not fans will look through the profiles and find talents which they love, trust and wanna invest on.

...aaaand let me guess... thsi platform is Twitter / Facebook / Instagram

you are right, but this would then be a focused platform on this target group

lets say fans financed one talent, then the label company will use the money to make an album and portion of the album profit goes back the shareholders(fans) who financed the album and the rest goes to the singer, publisher, ...

So yes. Very much like Q crates.

I like how you broke down my article !! what is Q crates? can you share more info? links?

https://qrates.com/
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Re: Validating new business model for a label company .. help me

Postby The Red Bladder » Mon Feb 19, 2018 2:45 pm

http://www.ifpi.org/downloads/GMR2017.pdf

Streaming? - yes.

CDs? - no!

Label - if you have the money (£Xm and more) to bankroll a 360 contract with a hot artist, maybe. Otherwise, leave well alone!
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Re: Validating new business model for a label company .. help me

Postby CS70 » Mon Feb 19, 2018 5:09 pm

Well nobody can say with absolute certainty how something will go, but the chances aint big, or at least you need to fill some big holes.

First, you are shifting risk, and as carrying risk is the primary role of a company such as a label, a label which doesn’t loses a lot of its role and business sense. You still have the curation, but that’s your biggest hole: the hard stuff to find nowadays is not talent or good productions, but attention. Starting from scratch, attracting fans to your channels is just as hard as attracting them to any other music oulet. The noise level is very high. What you need is a tremendous amount of luck, or some serious marketing muscle, just to get trhu to a potential fan base whichin turn may provide significant funding to your bands. Universal is not Universal because it has the best music, but because over the decades ha accumulated a marketing and financial wherewithal that allows it to get attention.Finally, there’s not much difference from what you describek and vanilla crowfunding.. why artist and potential fans would need you when they can generate their own crowfunding easily?

That said, every buisness starts with a bit of luck (someone wanting to purchase something you can produce), so no harm in trying. I mean, people went thru the .com era and still a few years later invested heavily in stuff like soundcloud, so everthing’s possible..
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Re: Validating new business model for a label company .. help me

Postby femuc » Tue Feb 20, 2018 8:37 am

Hey CS70, thanks a lot for your comments.
Well nobody can say with absolute certainty how something will go, but the chances aint big, or at least you need to fill some big holes.

First, you are shifting risk, and as carrying risk is the primary role of a company such as a label, a label which doesn’t loses a lot of its role and business sense. You still have the curation, but that’s your biggest hole: the hard stuff to find nowadays is not talent or good productions, but attention. Starting from scratch, attracting fans to your channels is just as hard as attracting them to any other music oulet. The noise level is very high. What you need is a tremendous amount of luck, or some serious marketing muscle, just to get trhu to a potential fan base whichin turn may provide significant funding to your bands.

my take here is that, im not literally shifting risk, but actually lowering it. if the fans are willing to invest their money on a talent, that means this talent was able to connect with them and grab their attention. you are right, at the end of the day the record deal goes to the artist who established the most attention and not necessarily the artist with best vocals/voice. so, the fact that the fans are investing their money and expecting great return is already a marketing tool. its like buying stocks at tesla, amazon while you know there might be some great returns.
at the moment, crowdfunding offers silly things in return. why would I give a new artist (who is not even famous yet) a €100 if I am only getting his/her signature back. I honestly could care less about his/her signature or meeting them. it is a different scenario if for example someone like Justin Bieber or Drake gives you a signed CD or something like that. but when the fans know that they can be financially part of the artist success, its a different game. I also bet that you can crowdfund much faster.
according to the global music report 2017, record companies are spending 27% of their revenues on A&R and marketing of their talents. my hypothesis is that if you include the fans into the mix financially, not only they choose the best for you, but also the marketing effort is spread throughout everyone who invested their money in and so, the 27% would be reduced.
Universal is not Universal because it has the best music, but because over the decades ha accumulated a marketing and financial wherewithal that allows it to get attention.Finally, there’s not much difference from what you describek and vanilla crowfunding.. why artist and potential fans would need you when they can generate their own crowfunding easily?

That said, every buisness starts with a bit of luck (someone wanting to purchase something you can produce), so no harm in trying. I mean, people went thru the .com era and still a few years later invested heavily in stuff like soundcloud, so everthing’s possible.

this is a business project in my university and I will get an excellent help to evolve the business side of the project. I am just lacking the music expertise who can support me during the project. the reason I posted this is to see if the problem I identified is even a problem, and if the solution I gave would provide a value to the industry.

your comments and supports are always welcome.
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Re: Validating new business model for a label company .. help me

Postby CS70 » Tue Feb 20, 2018 10:58 am

femuc wrote:my take here is that, im not literally shifting risk, but actually lowering it.

"risk" refers to where the financial exposure is in case of failure. If it's the label money that's invested, the label has the risk. If it's other people, it's other people.

One of the main traditional functions of a label is to carry this financial risk (in return for big cut of profits, in case of success). If it's the fans, and not the label, who provide the money, you've shifted the risk from you (the label) to them.

if the fans are willing to invest their money on a talent, that means this talent was able to connect with them and grab their attention. you are right, at the end of the day the record deal goes to the artist who established the most attention and not necessarily the artist with best vocals/voice.

That's not a problem at all, and not what I was talking about. The big hole in your plan is that - to grab the attention of fans for any music (best or not best) - you need to make your platform visible to them. You need fans for the platform before turning them into fans (and investors) for the music.

Exposing products to people (be them music or a platform) is the biggest hurdle and it's always been. Again, a traditional label has the money to invest in marketing and publicity in order to create fans (i.e. people who's exposed to the music and end up liking it). In itself this requires a substantial investment - regardless on how good or bad is the product. That money must come from somewhere and by definition the money to find fans cannot come from fans :D

All you can do that way is to put your platform (containing the music you think is good) "out there", and hope that people follow it (and thus may turn into fans of your artists). This is what everybody's doing and nothing different than what an artist himself may do. It's not a bad idea but not a business plan - since (just like a lot of good music that gets never discovered) you don't have yet a mechanism to fund the reaching of your platform's fans.
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