Business | Investment
Turn it up: Money going for a song
The digital revolution might be making it harder for record labels and retailers to make money out of music, but the decline in album sales has spawned a new type of investment that is attracting fans and City types alike.
- Reuters
- Published: 01:04 March 1, 2008
The digital revolution might be making it harder for record labels and retailers to make money out of music, but the decline in album sales has spawned a new type of investment that is attracting fans and City types alike.
Slicethepie.com has fin-anced 13 bands, earned 40,000 "scouts" more than £40,000 and landed hundreds of investors some rosy returns since its launch seven months ago.
"The problem the industry is struggling with is that the cost of producing new artists is phenomenally high," said the company's founder and CEO David Cortier-Dutton. "We effectively turn every music fan into a record label. Everyone can invest in new artists on an economically attractive basis."
Members, he says, include avid music fans who simply want to make some beer money from reviewing new artists, people whose main desire is to get close to the bands, City types looking to diversify their investments and others still who want to do the whole thing: discover new music, invest and make money out of their position.
The site adopts a "wisdom of crowds" philosophy. Some 7,500 artists have signed up to be independently and anonymously reviewed by members and, every month, the 20 with the top ratings go forward to try to qualify for funding.
Typically, one or two receive the required level of backing from investors who want to buy "contracts" in them, generally costing 50 pence each - and secure £15,000 to record and release an album.
Whereas a musician would need to shift at least 100,000 albums for a major record label to break even, those who sell just 1,000 will make money for their Slicethepie investors.
Two years after investment, investors receive £1 per album and 10 pence per single sale for every contract they hold. If the Arctic Monkeys had started out on Slicethepie, for example, investors would have received just over £100 for every share bought, based on album sales of 1.1 million. So a £20 investment would be turned into £2,000.
Artists retain copyright on their work and are free to sign to a traditional label at any time, provided it is willing to pay a 50 per cent premium.
Investors can also buy and sell contracts in artists on what is effectively a music stock exchange.
Virtual exchange
Would-be traders can try their hand on a virtual exchange. Wannabe music moguls are given £1,000 of imaginary money, with the top 10 traders every week receiving £20 each. As for Slicethepie itself, it earns commission on funds raised, trades and receives a small share of royalties.
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