Investing In Indie Bands: A Business Model To Support The Music Industry

TThere are countless articles that have been circulating the internet for years on how music piracy is killing the music industry at the expense of starving musicians. And although there are still many new bands that attempt their luck and talents starting from nowhere other than their garages and basements, it is without doubt that the very vast majority of these artists cannot make it past a few local gigs and a thousand or so MySpace fans. These bands are often composed of young adults and adolescents, studying at least part time, and keeping a job in order to be able to fund their musical passions.

Using the stock exchange as a basis for my business model, I’ve constructed a theoretical approach to help support up-and-coming bands, starting from when they’re still at their earliest stages of their artistic and commercial development. Thus, individuals could invest in bands that they think have potential, and when (or if) the band gains popularity and starts gaining profits from CD and ticket sales, the initial investors get a financial return from the band.

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Because buying a “share” or “stock” of a band sounds too possessive (these are still human beings after all), we’ll use the term “bond”. A bond in the finance world is a debt security, as in, an individual buys a debt from a company so that at a future date, once the company becomes more profitable, the investor is repaid the amount of the bond by the company along with interest. In the case of investing in bands, the debt would be repaid if the band eventually sells a profitable amount of music, and instead of interest, the band would also pay back a percentage of their revenue.

One way that this whole process can be facilitated is if we can invest in specific bands through their record labels rather than investing in the record label as a whole, or giving money directly to the band. Although this would technically eliminate all bands that are unsigned, it could conversely create an opportunity for them to get signed: they amass a certain amount of money from investors (which would mostly come from family and friends), and offer it to the label in exchange of getting signed, which consequently reduces the risk for the label of signing a new band since they won’t require as large a sum of funds from their own treasury. This greatly supports the industry on many levels: first, the band because they are now signed with a record label and have a sum of money that will go to their commercial needs. Second, it supports the record label by allowing them to sign more bands at a lower risk. Finally, the mechanism also provides a way for people that love music and that are looking for investment opportunities to invest in an area that they know and enjoy versus the complexities of stock markets. Because of a possible financial return, it is more appealing than simply supporting a band by buying their music.

Although this business model is certainly flawed and doesn’t consider potential problems such as band breakups, it is mainly to serve as a theoretical basis to thinking outside of the box in regards to supporting young and talented bands that are swallowed by the leviathan that is the music industry scene. There will practically never be a sudden dramatic plunge in illegal music downloads, and even if there are several other ways of supporting a band, there are still countless obstacles musicians have to face before being able to make sustainable careers out of their art. It is up to us, their avid listeners, to provide the beginnings of a reform that can allow musicians to attain their appropriate level of recognition by being judged solely on their devotion and talent.