This is Celia Hirschman with On the Beat for KCRW.
The record label business continues to evolve or devolve, depending on how you view it. Thousands gather in Austin, Texas this week, for the annual South by Southwest music festival, to celebrate or bemoan their future fate. Meanwhile, new companies are hard at work, trying to reinvent the business we've known.
Take, for example, the case of Shayan Italia. At the age of 20, following the tragic loss of both his parents, he discovered a gift for singing and songwriting. Completely self taught, Mr. Italia wrote and produced 100 songs. Following his education in India, he went on to earn a Music Business Masters Degree in London. Understanding that the industry was under a monumental shift, Shayan Italia decided to try and generate funds for his music on his own.
In 2005 he began auctioning off shares in his future earnings on eBay. He generated $18,000 in seven days through the auction site. By creating a business plan and seeking a more traditional financing route, he solicited another $1 million from private investors. With that sum of money, Italia and his relatives built a record label, hiring some of England's top music promoters to help them. Once the music was recorded, they built a hybrid distribution system. They organized traditional marketing distribution to get his CD in record stores. But in addition, they placed advertisements in local newspapers and on music websites, encouraging hungry entrepreneurs to become sales representatives for a 50% profit margin. These reps were instructed to sell his music to the public in restaurants, malls, local cinemas, supermarkets...in fact anywhere the public enjoyed hanging out.
So here's a guy, a good looking guy with a great voice, who's figured out a way to generate financing outside the traditional system. And while using the traditional distribution outlets, he's also built a sales program based on the Girl Scout Cookie philosophy of one-to-one marketing. Those who invested will get a large percentage of his earnings as their benefit of getting in on the ground floor.
This kind of financing is becoming more common every day. A new website called Sellaband, joins recording artists with investors. Sellaband has two ways of participating. As an artist, you can use Sellaband to focus investors on your music project. As an investor, you can purchase shares of any artist you want on the site in $10 increments.
Once an artist earns $50,000 through investors, (which is five thousand $10 shares), the artist is given the money to record, with a professional production team in place to insure the best quality. Limited Edition CD's are created for the investors. Regular CD's are available for purchase as are digital downloads. The income from these sales are split between the artist, their investors and Sellaband. Free downloads are offered to help grow public interest, and investors and artists are encouraged to build word of mouth marketing. Real success with this kind of financing can only come over time, and like traditional record labels, investment is always a risk. But whether Sellaband, or Shayan Italia break through or not, one thing is clear. Financing a recording career has gotten a lot more transparent and interesting. And as American Idol has shown the world, getting the public personally involved in the success of an artists' career, can have a very positive effect.
This is Celia Hirschman with On the Beat for KCRW.