Competition vs. Validation

 When I decided to leave the certainty of multiple steady paychecks to start a new company, everybody I briefed thought there was no possible way it could succeed, and that gave me the confidence that I’d have no competition.  The rest, as they say is history.  But since that time, I have also come to appreciate that sometimes it is more valuable to have at least some competition proving that the business idea has at least some merit.  Some percentage of a provable market is worth more than 100% of a market that simply does not exist.  Enter GrooveBox Studios.

GrooveBox Studios was born of a frustration that is nearly universal among all artists I’ve encountered: bands spend too much of their own money on projects and tours that generally enrich everybody else before the band earns a dollar.  Which is not sustainable.  The founders of GrooveBox Studios hit the business reset button and came up with a model that is really quite analogous to what we, too derived: the co-production model.  For starters, both GrooveBox and The Miraverse® promote the idea that instead of being an up-front cost that the artist must bear, the recording process is something that delivers cash and profit directly to the artist, up-front.

Moreover, GrooveBox Studios recognize that social media, for example, can either be used as a tool to amplify all the wrongs of the old model or it can be used as a tool to completely change the rules and create entirely new value propositions and platforms.  Kickstarter, for example, helped to coordinate and initiate almost $35M worth of new music projects in 2012 alone.  By bringing new experiences to new audiences, entirely new sources of revenues can help make the impossible possible for independent artists.

The pricing model established by GrooveBox is right on target with the averages of the 2012 Kickstarter data: with music pledges averaging $6898 per project ($6662 if we remove Amanda Palmer’s $1.2M outlier), that’s enough to do an EP at GrooveBox and still have money for the release party.  Nice!

Our pricing appears to be about twice what GrooveBox is charging, which simply means that we are selling to a different part of the market than GrooveBox is.  Which is cool…with one caveat for us.  One interesting website that has a lot of data-driven analysis about music-related kickstarters strongly cautions that many Kickstarter projects fail because the fundraising target is too high.  While more than 5,000 music Kickstarter projects were successful, more than 4,000 were not.  Amanda Palmber notwithstanding, it’s fair to assume that the shape of the curve for successful Kickstarter projects skews heavily toward the low-cost side and is not very symmetric.  Which means that at about twice the price of GrooveBox, we may only be addressing 1/10th the market that they do.  Nevertheless, 1/10th of 5,000+ projects means that there were 500 projects in 2012 that could have economically considered doing a co-production at The Miraverse.  That’s a lot of opportunities!

Looking forward to 2013 and beyond, I believe there are several trends that bode well for us.  First of all, I expect that the trend toward using Kickstarter to fund music projects is going to continue growing exponentially, with perhaps a 50% growth rate year over year for the next several years.  Larger markets mean more opportunities to win business, especially at the high end.  Second, with the ability to host about 2x the audience size of GrooveBox in a deluxe (as opposed to “spartan”) environment, we can change the economic calculus even further in the artist’s favor, despite our 2x higher prices.  (One of our events last year raised $25,000 against a studio/catering cost of about $10,000–not bad!)

I hope GrooveBox is a great success.  Detroit deserves a vibrant and economically sustainable music production scene, and GrooveBox looks like a really smart start in that direction.

But I also believe that we are creating a path to success, both for ourselves and for artists who choose to record and perform at The Miraverse.  At least that’s what the numbers are telling me…

So…come be a part of this new music production revolution, either as an artist or as a co-producer!

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