Reward & Reputation Part 4 – Crowdfunding Products

10 05 2007

SellaBand

This is post #4 in a series on Reward & Reputation Systems using “crowdsourcing” as a means of content co-creation. This post will examine the “crowdfunding” phenomenon which is somewhat different but related to crowdsourcing. If you have not reviewed the earlier postings on the “product co-creation process,” please locate the two postings via the search function to the right. This post series will assume you are already familiar with it.
Community Funded Products & Open Business Models
Clemence (photo above) is a 19 year old Parisian who just became the 4th music artist to reach $50,000US goal that launched her music career with her first album funded by music lovers around the world and produced by SellaBand.com in Germany.

American Idol franchise and Simon Cowell…. be afraid, be very afraid.

All frustrated musicians who ever felt they had the talent but could never crack the traditional music industry’s “closed business model” now have a completely new way to get recorded and promoted. SellaBand.com gives music lovers a chance to “invest” in the music they like.

The mission of SellaBand as told on their site.

The music industry is all about fences. Those who are on the inside, and those who are on the outside. SellaBand wants to break down all the fences. Everybody with a passion for music can be on the inside. It’s your music. It’s your choice.

SellaBand is like other new businesses using open business models like InnoCentive or NineSigma that create a new marketplace expanding the whole notion of value creation for buyers and sellers (or seekers and solvers). Online community and product co-creation once again is innovating new ways for individuals to harness their power and creativity that is paying profits to seekers and solvers or as SellaBand puts it “artists” and “believers.”

Here is how it works
Artists

  • Sing up for free
  • Create an online profile and upload demo files (As an Artist on SellaBand you can stay or go as you please, when you please. At any time before you have reached the Goal of $50,000, you can leave the Program and shut down your Profile Page)
  • Raise $50,000US via believer community who invest in increments called “parts” where $10US = 1 part; 5,000 parts = $50,000US
  • Record your work

 

Believers (investors)

  • Find the right artist
  • Sign up for free
  • Participate by funding in increments of $10US = 1 part (At any point you can withdraw your Parts and pick a different Artist. You can even get your money back.)

SellaBand Business Model
Of the $50,000, $30,000 is used for recording the CD. SellaBand assigns an A&R- manager who will book the producer, studio and mastering facility. The rest of the budget is used for manufacturing, packaging and mailing the 5,000 CDs to the artists’ Believers.

Artists are entitled to earn money via its Download Portal. SellaBand will make available the Artist’s music production as free downloads on the website. The advertisement proceeds generated on the website will be credited to the Artists corresponding with the number of downloads related to their music titles in relation to the total number of downloads. The resulting amount will be distributed between the Artist, the Believers of this Artist and SellaBand, in equal parts. The share of these revenues for the Believers will be split pro rata according to the number of parts of this Artist the Believer has purchased.

The number of times an artist’s music is downloaded for free (by unique visitors) is crucial for the money an artist and their investing fans make.

Besides the limited edition of the CD as mentioned, SellaBand will produce a regular edition of the CD. The Believer will receive a royalty of 50% of the net selling price minus production costs.

SellaBand owns the Album Master for 12 months after completion of the recording of the CD. After one full year the artist will get the full rights to the Album Master.Intellectual Property: 60% of the publishing rights of SellaBand-produced songs go to the artist. 10% goes to the Production team. The rest (30%) goes to SellaBand.

Take Aways

  1. Trade associations need to learn to adapt closed models with more open business models. Give them more than symbolic participation (text message your Idol vote), let them get involved in the process.
  2. Professional societies might bankroll new product ideas from their own membership rather than locate funding within their own budgets.
  3. Crowdfunding offers global reach and customer-centric ways to develop essential products the market is willing to bankroll itself.

No more Simon Cowell. How great is that?

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