Wednesday, October 19, 2016

Another day and another crowdfunding appeal

Yet another crowdfunding request has appeared in my inbox, this time for an ensemble I have considerable respect for. Which prompts some thoughts from me about crowdfunding. Seismic shifts in the media industry mean that traditional funding from record companies and book publishers for new projects is as scarce as the proverbial hens' teeth. To help fill the funding gap crowdfunding - raising finance from the audience - has stepped in. Without crowdfunding some important and successful projects would never have come to fruition. But that still does not mean that the process should not be subject to scrutiny and debate.

Crowdfunding in its present guise is a child of the internet, but the principle has a distinguished history. One of the earliest examples in the record industry was the 1931 subscription edition of Hugo Wolf lieder masterminded by Walter Legge and HMV, while in the book industry during the previous century Charles Dickens often sold his novels in monthly magazine serialisations before publishing them in book form. In the second half of the 20th century corporate record companies and publishing houses rose to power, and they took over the essential function of providing advance funding for new recordings and books. When these corporate powerhouses were at their peak they funded high risk projects that otherwise would never have seen the light of day: just one example is Decca's recording of the complete Ring with Solti and the Vienna Philharmonic. But as the Millennium approached the internet, shifting demographics and management incompetence undermined the corporate players, and as a result the primary source of risk funding started to dry up. With advance funding from corporate sources very limited, artists turned once again to their audience for funding, and powered by the new technology crowdfunding was born. There are now around 100 crowdfunding platforms and it is estimated that £2.7bn was raised through crowdfunding in 2015.

Any arts project involves both creative and financial risk, so the advent of crowdfunding is a positive development. But like all products of new technologies there are downsides, and as is so often the case those downsides are being overlooked in the rush to embrace the new and the empowering. Flaunting credentials is not something I am keen on. But at this point to deflect accusations of a luddite position on new delivery platforms I will put on brief record my personal involvement. In the early 1990s I ran a pioneering and ultimately unsuccessful business that delivered software on demand,and ten years later I was a member of the project team that researched bringing print on demand technology to the UK. In addition I held board level positions in music and book distributors. Some remnants from those days remain online.

Concerns over the potential downsides of crowdfunding can be grouped under the broad headings of quality controls and financial controls. Corporate record companies and publishing houses have been vilified with considerable justification. But they do provide an essential quality control function through editors and producers with years of experience. One only needs to look at what has happened to editorial standards in the brave new world of music blogging to understand the perils of dispensing with editorial quality controls. Crowdfunding and self-publishing are close cousins, and too many self-published books contain errors that would never have got past the most junior sub-editor. Just to give one example, a self-published book I read recently referred to "rights of passage" three times in one chapter. Editors and producers provide a guarantee of production if not creative quality. The removal of that guarantee puts the purchasers at risk, and they are the very people that crowdfunding depends on.

Financial controls, or the lack thereof, are the second area of concern. Again the corporate players have been accused with justification of profligacy, and I can show the scars having been responsible while at EMI for the budget of a minder and German office devoted exclusively and expensively to keeping Herbert von Karajan onside. But the accounting systems of the corporates did provide checks and balances, and those checks are an optional extra in crowdfunding. Many valuable creative projects have been made possible through crowdfunding without any evidence of malfeasance. But loan-based crowdfunding - where investors lend money to consumers or businesses and get their money back in monthly instalments - has attracted the attention of the UK Financial Conduct Authority. The high profile collapse this year of Lending Club, one of the largest crowdfunding platforms in the US, showed that those concerns are not without foundation. A typical crowdfunded creative project does not use the loan model. Instead it offers a book/CD/download and other privileges in return for a pledge; however the dispersal of funds is still an opaque area. And it is not widely known that crowdfunding platforms take around 8% of the funds raised as a management fee.

In recognition of the quality problem a new breed of intermediary has emerged of which Unbound is the leading example. To quote the Unbound website " Unbound is both a funding platform and a publisher, fulfilling all the normal publishing functions but also splitting a book's net profit 50/50 with the author". Acclaimed books have been brought to market by Unbound and the company is respected within the publishing industry. Unbound is both a funding platform and a publisher, and their executive team undoubtedly has a wealth of experience. However, although there are many free lunches in publishing, there is no free experience. Unbound is privately held and is backed by three venture capital funds. All of which is perfectly in order and in the public domain. But it does mean that 50% of net profits generated by an Unbound crowdfunded book go to a privately held media company whose backers include a group of high-net worth investors.

The latest crowdfunding appeal to reach me came from Ali Keeler who is raising funds to record his Firdaus Ensemble's second album. I hope that having read this far Ali is not regretting asking me to give his appeal a heads up. Let me say I have huge admiration for Ali's work - see my interview with him - and his project avoids the less attractive aspects of crowdfunding that I have discussed here. And it is noteworthy that the funding platform is LaunchGood which targets the Muslim community worldwide. But On An Overgrown Path doesn't do PR, so I have given a personal perspective. I hope that my thoughts bring a little balance to the crowdfunding euphoria, and I also hope that readers will consider Ali Keeler's deserving appeal.

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