What can musicians learn from start-up companies in tech? As the tech world hurtles forward, artists face a landscape that can be confusing. How do you make money when people don’t buy music? What does it mean when a record deal is no longer a dream? How do you build communities at the mercy of the algorithm? What do startups do differently that artists could learn? To answer these questions, the Australian Institute of Music’s startup incubator iHUB brought together a Sparkfest panel of experts which included an artist, startup experts and investors, lawyers, managers and record company veterans. Here’s a few highlights from the thought-provoking discussion.
THE OLD MODEL: ONE HUGE INVESTOR & THE FOREVER TRADE
Once upon a time, the record company was the primary investor in an artist’s future, and the exchange centred primarily on a trade of recorded music rights. “Artists got their capital from someone who represented the recorded music piece of the puzzle,” Damian Rinaldi – Founder and Principal at Sonic Lawyers (who represent the Bon Scott estate) had to say. Labels backed the artist, labels paid the publishers – but with the rise of digital music platforms like iTunes, (who paid publishers directly) in the mid-Aughts, this fell apart, and this hit the artists hard, not to mention the record companies. “There were ten sad years from 2005-2015 where there was year-on-year decline [for major labels],” says Gavin Parry, CEO of Palisady Asia Pacific and former major label executive. “When you examine the old model, it doesn’t stand up to scrutiny,” Damian says. “Moving forward, the artists keeping everything and becoming the centre of the universe makes the most sense,” Damian concluded. However, it isn’t easy to build a new model. “When you’re down the bottom of the pyramid, it’s pretty tough, and it’s pretty lonely, and you’re doing a lot of it yourself,” Maven Agency Director Ken Outch says. “It’s harder to break through the rest of the noise and competition,” he added.
THE ARTISTS’ QUESTION: HOW DO YOU GET PEOPLE TO INVEST?
One artist at the centre of her own universe is independent musician Elana Stone. A member of All Our Exes Live in Texas, a session musician for John Butler Trio and Missy Higgins and a solo artist in her own right, she’s spent two decades constantly “starting from scratch” as the industry evolves.
“What worries me about the current climate is that people don’t want to pay for music anymore,” Elana says. ‘There was a time when everyone told us to just give music away … and eventually they’d invest. Over time, that value has been corroded, because access to music is so high [thanks to the myriad of streaming services, listeners can access more music than every before]. And the enthusiasm for everyone to make art is so high, which is a really great thing. But how do we get people to value what we do and to invest in what we do?” she muses. “What can I offer to my community rather than just “hosing it” with my songs? In some ways, that hasn’t worked. As musicians we all come from a place of self expression and cathartis. But what are we offering as an experience?” she muses. Could the “experience” be another level of investment?
WHAT ARTISTS & STARTUPS SHARE: ASYMMETRIC RISK
The “asymmetric risk” they share is a distinct parallel between those who back a fledgling startup and those who back an emerging artist. “In backing a band, there’s only the very top that make the absolute hits,” says Lisa Fedorenko, Investment Manager at Alberts. “It’s very similar in the startup space where everyone’s trying to back the next ‘unicorn’ (billion dollar company),” she continues. “Most companies don’t become billion dollar companies. Most bands don’t have a billion records sold,” she says. That doesn’t mean that artists and their investors can’t build something beautiful, that yields awesome returns, of course. Shared values are also key, in both situations. Artists don’t want their publishers to mess with their creative licence. Conversely, “founders don’t want someone who’ll micromanage how they’re going to ‘change the world’,” she muses. Alberts’ long history starts with selling instruments, then managing music publishing for artists including AC/DC and The Easybeats. Alberts now invests across three main areas: the environment, mental health and wellbeing, arts/music/entertainment and equality. With a decade of investing under her belt, Lisa is well-versed in the world of venture capitalism and taking a risk on bold ideas.
WHAT ARTISTS & STARTUPS SHARE: THE COLLECTIVE WIN
Elana Stone took a startup model approach to All Our Exes Live in Texas. With an even split between the four singer-songwriters, they each took on a role (from “merch queen” to booking emails) and maintained day jobs whilst not taking any money for the first five years, instead reinvesting it back into the growth of the company and band. “Ultimately, this meant we could build a team around us. So we had booking agents in Western countries, a manager. It was the first time I’d experienced having a team around me, and how that can propel you into people’s understanding of who you are,” Elana says. She invites artists to find a collective. “Even if they just have a spiritual belief in you, I feel like you need a champion in order to get anywhere in this industry,” she says of her own exposure to the startup model. “So it’s about sort of dividing the whole into who’s going to get pieces,” Lisa says. Whether it is just your mum’s friends or a complex network of fans around the globe, or eventually maybe a label at Series A (the first big round of funding), “anyone who has a piece of it wants to move the business or band forward,” Lisa adds.
Now, it must be acknowledged that projecting future success of what can be a five-way marriage between creative people that can almost never predict “Capital S” songs makes asking for investors a more challenging effort. However, coming along for the ride might just be the pull.
WHAT ARTISTS & STARTUPS SHARE: THE INDIVIDUAL APPEAL
People invest in the artist, or the founder, first and foremost – not the art or the idea. That human element is crucial when you’re out there chasing backers. It’s as much about the personality and energy of the founders, or the artists as the business. “They need to have the most resilience, the most hustle and grit. So there’s the team, but it is so much down to those individuals,” Lisa says.
“It’s not a progressive idea,” Sonic Lawyers’ Damian Rinaldi says. “It’s really the idea of patrons. If you think back hundreds of years ago, famous painters had patrons,” he said. The difference is that with the vast array of income streams an artist can build with a small but committed audience, there are great opportunities to make this a mutually beneficial venture – not only successful from a business perspective, but serving the bigger goal – building viable communities around artists doing enriching work. The thing is, connection is key. “We need to find better ways of connecting the people with the money with the creative people,” he added.
So, what can artists learn from startups? Build a rich universe, know you’re the centre of it, invite people into it as an actual stakeholder as early as possible, and roll with the punches.