Crowdfunding campaigns and investor preferences in music business - Evidence from Finland

Abstract

Purpose of the study This paper has two main goals: first, produce statistical data on music crowdfunding campaigns on the Finnish rewards-based crowdfunding platform Mesenaatti.me to describe campaign features and fundraising performance; and second, study the characteristics and funding preferences of potential Finnish investors to music crowdfunding. My findings add to the literature on rewards-based crowdfunding in Finland as well as provide fund seeking music artists and bands with practical information, encouraging them consider putting up a crowdfunding campaign and helping with the campaign design. Given the financing constraints in the music business, crowdfunding may help in solving an important market failure.

Data and methodology In the first part of my descriptive analysis I use the data on 150 ended campaigns under the music category on Mesenaatti.me between Feb 2012 and May 2017 that seek funds for recordings, live performances and music videos to statistically depict music campaign performance in Finland. In the second part I examine investor characteristics and reward preferences of 400 respondents contacted through a web questionnaire and analyze features of several subsamples.

Findings I calculate that the success rate of music projects on Mesenaatti.me is 76%, successful (unsuccessful) campaigns exceeding (falling below) their minimum goal with a median of 31% (84%), a pattern in relative margin size also reported by prior research. Since its launch, Mesenaatti.me has helped musical projects raise 323 600 euros. Album production is the most typical funding target. Campaign size of the successful projects stays on average below 3000 euros measured by the minimum goal, and below 2000 euros when measured by the funded amount. The actual goal is seldom achieved. Supporting prior findings, there seems to be a positive relationship between the minimum goal and funded amount. This could be due to a signal of trust in the project by the fund seekers, which plays a role in all-or-nothing types of fundraising. 91.3% of the survey respondents express willingness to crowdfund music in the future. CD or a vinyl are considered as attractive funding targets by 88%, whereas a live performance only by 61%. However, a gig or concert ticket has the greatest reward popularity among potential investors with a support of 74%. Unreleased CD (72%) and vinyl (54%) come as next, indicating that supporting core business with a relatively small contribution is the main driver to crowdfund an artist or a band. Exclusiveness of rewards was valued by 19%, whereas 91% expressed willingness to donate. The average (median) for maximum contribution among potential investors is around 100 (50) euros for musically interesting campaigns. Supporting family or friends leads to higher paying willingness.