This New Crowdfunding Platform Lets Fans Invest in Music Artists' Success | Entrepreneur (2024)

FAQs

This New Crowdfunding Platform Lets Fans Invest in Music Artists' Success | Entrepreneur? ›

That's the promise of TapTape, a new funding platform that allows music fans to invest in groups they believe in and get a share of future profits. TapTape tailors to up-and-coming bands that have already started to establish themselves in the industry and fans who want to actively participate in their success.

Invest in Music Royalty Funds

There are a few music royalty funds that are open to investors. For example, Hipgnosis Songs Fund and Mills Music Trust are two publicly traded funds that own song royalties and distribute dividends to shareholders.

As listeners invest, BaseNote collects the cash and distributes it to the artist. Instead of waiting years for royalties to accrue, artists can immediately use the money to record new music, go on tour, film music videos, and more.

There are four kinds of crowdfunding campaigns you can use for your business. With donation-based funding, contributors give money without receiving anything in return. In equity funding, backers get shares of the business. For debt-based funding, donors are repaid with interest.

You Could Earn Above-Average Returns

Although its track record is relatively short, crowdfunding has the potential to be a lucrative bet for investors. Depending on the type of investment involved, it's possible to match the market or even beat it.

Kickstarter: Best all-around crowdfunding platform, highest success rates. Indiegogo: Most flexible crowdfunding platform, keep the funds you raise. ArtistShare: Best for audience targeting. Patreon: Best for recurring income; not raising for one specific project.

Napster offers the highest PPS rate among all music streaming platforms! On average it pays around $0.019 per one stream, 1$ per 59 streams, $100 per 5,945 streams, and $1000 per 59,453 streams. Estimate your earnings with an online music streaming calculator.

TIDAL ranks higher than both Spotify and Apple Music in terms of royalty rate and the direct artist payouts available on the platform. It's definitely worth weighing up your options when deciding which DSP(s) to upload your music to.

What are the negatives to crowdfunding? ›

At first, only accredited investors were allowed to get involved. However, in 2016, anyone could start accessing platforms to invest in new business, thanks to so-called Title III rules. 1 Now, you can take $100 to an investment crowdfunding platform and invest money in the hopes that you will see a return.

In summary, if a Kickstarter marketing project fails then:

The pledges stay with its backers. Refunds are returned automatically back to backers' debit/credit cards.

Funds are available to withdraw 14 days after launching your page. To withdraw what you've raised so far, all you need to do is head to the 'Funds' tab on your Page. It takes 4-6 working days for the funds to reach you after requesting a withdrawal.

Anyone can invest in a Regulation Crowdfunding offering. Because of the risks involved with this type of investing, however, you are limited in how much you can invest during any 12-month period in these transactions. The limitation on how much you can invest depends on your net worth and annual income.

For the fund, it boils down to a simple diversification story. Music rights provide steady cash flows through time and are uncorrelated with traditional asset classes such as fixed income or equity. Moreover, they may offer the additional advantage of being intellectual property and, thus, intangible assets.

Investing in music royalties offers several potential advantages over traditional asset classes, including: Long-term residual income stream: Music royalties can provide a steady stream of cash flow that can last for many years, even after a song has been recorded.

Musicians who focus on performance earn money from advances, merchandise, royalties, licensing fees and playing live music. If the artist works with a record label, they pay a share of their money to others involved, such as managers, agents, promoters, PR teams and sound engineers.

A license with BMI can range from $250 to $400 per year, but larger businesses might pay upward of $2,000 per year.

Can I invest in royalties? ›

Investors can acquire rights to royalty income by purchasing shares of royalty trusts or bidding on royalty auction exchanges. If you're thinking about investing in royalty income, you may want to speak with a financial advisor first. SmartAsset's free tool can match you with advisors that serve your area.

Basics of crowdfunding

Artists run “campaigns” that offer “rewards” in return for these pledges of financial support for their projects. You usually commit to raising a certain amount of money for your project by a deadline. If you don't meet your funding target, the money gets returned to your project supporters.

Music crowdfunding platforms such as Kickstarter formalise the fan-funding process. Fans are asked to contribute to the project through the artist or band's website and social media presence. Musicians retain their rights and the website charges a commission once the agreed target has been raised.

Fans of music have the option to donate and collectively raise money with the goal of jump-starting the career of a given musical artist. The fan-funding of music occurs primarily through web-based services using a business model for crowdfunding. Fans are typically given rewards based on their monetary contributions.

Deezer - User Centric Payment System (UCPS)

Who is paid: "Music streaming services usually do not pay artists directly. In most cases, they pay the artist's record labels, publishers, distributors or collecting societies which then pay the artists according to their individual agreements.

How much money did 'Here Comes the Sun' generate on Spotify? Music distribution company Ditto Music, headquartered in Liverpool and New York, estimates that "Here Comes The Sun" has generated about $4.37 million from 1 billion Spotify streams, based on U.S. streaming rates.

Crowdfunding is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from a large number of people via online platforms. Crowdfunding is most often used by startup companies or growing businesses as a way of accessing alternative funds.

22.4% is the average success rate of crowdfunding campaigns. In fact, not even a quarter of crowdfunding campaigns reach their goals. According to The Crowdfunding Center, the average success rate of crowdfunding campaigns is a scant 22.4%.

What is the biggest challenge with crowdfunding? ›

One of the challenges every entrepreneur faces when it comes to raising capital via crowdfunding is figuring out how much money they should raise. While you might think this is just a simple matter of deciding how much money you need to invest in your startup, other things also come into play.

There are four main types of crowdfunding, including donation, reward, equity, and debt crowdfunding options.

Crowdfunding campaigns on Kickstarter and Indiegogo can be as long as 60 days, but we recommend you plan for a campaign that's 30-40 days at most. If you work on building a mailing list and testing your product in the time before you hit the launch button you should expect to hit your goal fairly quickly.

The SEC limits the dollar amount an individual investor can invest across all crowdfunding offerings within 12 months. Securities purchased in a crowdfunding transaction generally cannot be resold for one year. Regulated crowdfunding offerings are subject to "bad actor" disqualification provisions.

What's the average success rate of crowdfunding campaigns? The average success rate of crowdfunding operations is 22.4%. However, many campaigns do get financed, even if unsuccessful. In total, 38.92% of crowdfunding projects are fully funded.

Buying shares of art 🖼

By and large, art investment platforms work in fairly similar ways. Some buy an individual artwork themselves, then create and list shares that other investors can buy – making money by charging a fee for managing the process, as well as for storing and insuring the art on investors' behalf.

Angel Investors

Angel investing is present in the music industry. They are private music investors who look for investments in the very early phases of business development.

NetEase, Inc. (NASDAQ:NTES), Sirius XM Holdings Inc. (NASDAQ:SIRI), Warner Music Group Corp. (NASDAQ:WMG), and Spotify Technology S.A. (NYSE:SPOT) are some top music stocks according to hedge funds.

How do artists find investors? ›

The most obvious routes to finding an investor for your music are: your local music scene - ask other artists and promoters. your local business community, including local Chambers of Commerce, business development organisations, business networks and local councils.

A long-term reliable investment

One of the main reasons why art is a good investment is because it holds its value over time. Unlike stocks or other investments, art does not tend to go up and down in value based on market fluctuations.

Sell your art or design products

Selling is a foolproof way of earning some money, and means that the individual who is parting with their cash gets something in return. Take a look at your body of work and choose work to put up for sale. This can be done through your artist website, Instagram account or Etsy shop.

You can sell digital copies of your art or have options for shipping your products to your customers. If you're a performance artist or musician, consider selling recordings of your work online. You may also want to create a digital portfolio of your works as a way of attracting potential customers.

The three types of investors in a business are pre-investors, passive investors, and active investors. Pre-investors are those that are not professional investors. These include friends and family that are able to commit a small amount of capital towards your business.

The musician receives a royalty on songs after putting copyright protection on the music. The royalties on this song last over the period that the copyright protection of the song lasts.

Composition: Songwriters often sign with publishers in what's called a publishing deal. The publisher takes ownership of the copyright and in return has the task of licensing the composition and collecting royalties. Royalties generated are typically split 50/50 between songwriter and publisher.

Generally, the standard royalty rates for authors is under 10% for traditional publishing and up to 70% with self-publishing. That's right. In the example above, self-published authors make over $24,000 more than traditional authors for the same number of books sold.